Cheap, Easy Credit And High Price Expectations
A weekend topic starting with Reuters. “A decade on from the financial crisis, global monetary policy is finally tightening, with the Federal Reserve raising U.S. interest rates and other central banks gradually turning off the stimulus taps. But despite the ‘normalisation’ underway, there’s a glaring abnormality that should be flashing red to the Fed and central bankers everywhere: financial conditions are easier now than at any point in over 40 years. The Chicago Fed’s national financial conditions index was last at -0.94, its lowest since April 1976. The Goldman Sachs U.S. financial conditions index is now at its lowest level since January 1990, when it was first compiled. This is the mirror image of soaring markets like equities that a growing number of observers say are now starting to look like bubbles.”
From Lew Sichelman.”The great minds of the mortgage market continue to work overtime, coming up with fresh ideas in an effort to reach more would-be homebuyers. Pilot programs like these don’t always prove worthwhile; in fact, some never make it beyond the testing stage. But they show the lengths to which lenders are willing to go for new buyers. Below are some of the latest offerings from the mortgage world.”
“Citadel Servicing Co. in California has come up with a loan for which buyers qualify with just a verification-of-employment document. Applicants need two years of continuous employment, plus a voice verification of employment on the day the loan closes. They must also confirm they have enough money on hand for at least a 25 percent down payment, though no other proof of income is necessary. The program is open to borrowers with a minimum 650 credit score and is good for loan amounts between $250,000 and $3 million.”
From Marketplace. “Tim Mayopoulos started working at Fannie Mae not long after following a career on Wall Street. He became CEO in 2012. He talked to host Kai Ryssdal. Mayopoulos: ‘Private capital ought to be the primary source of funding for the housing markets in the United States. And in fact, the innovations that we’ve been a big part of since conservatorship was imposed nine years ago have contributed to that. So if you think historically, Fannie Mae has this enormous balance sheet, we’re making all these loans, we have 18 million mortgage loans on our balance sheet. Historically, we would have held all of that credit risk for the life of those assets. Today we don’t do that. We now transfer a very significant part of that credit risk to private capital. In other words, we’re essentially getting reinsurance on what we have. So people have the impression that Fannie and Freddie are continuing to take all this risk. We still take some risk, but we are transferring a very very big part of that risk to private capital.’”
From the University of Pennsylvania. “Wharton’s Tim Landvoigt discusses how underpriced government mortgage guarantees contributed to the housing crisis. Tim Landvoigt: ‘One of the areas that I do research in is housing and mortgage finance. I have several papers that are concerned with the question: What were the main drivers of the housing boom in the early 2000s? The candidate explanations that people have come up with are cheap credit, easy access to credit and high house price expectations — expectations about large future gains in house prices.’”
“Knowledge@Wharton:’ One of the questions that has come out of that housing crisis has been what to do next with Fannie Mae and Freddie Mac, and you have a paper that looks at that. Can you talk about your key takeaways?’”
“Landvoigt: ‘That paper is called ‘Phasing Out the GSEs,’ which is a somewhat provocative title. [GSE stands for government-sponsored enterprise.] But what we’re really looking at in that paper is whether we should increase the guarantee fee that these government sponsored enterprises charge banks when they sell the loans in the secondary market. Our conclusion is that the guarantee fee has been much too low historically. It’s basically a very large subsidy to mortgages originated by banks that then sold to Fannie Mae and Freddie Mac. We show theoretically that that would provide incentives for banks to take on more risk in other areas of that balance sheet. Because we’re removing a lot of risk from the mortgage part.’”
From Richmond Magazine. “Maybe it was the hours spent playing house in the lofted treehouse bunk bed my dad made for me. Or maybe it was my early infatuation with TLC’s ‘Trading Spaces’ and then HGTV. It didn’t feel extraordinary to dream of buying a house at age 24. To turn that dream into a reality, however, I needed more than a gut feeling. Here’s what I learned over the course of the home-buying experience that helped make my dream come true.”
“First, you don’t need a 20 percent down payment to mortgage a house. That’s the biggest misconception for first-time home buyers, according to Ingrid Sell, a senior loan officer at Village Bank. ‘In fact, if you’re a first-time home buyer, the down payment is less of an issue,’ says Sell, who has worked in mortgages for 24 years and was, full disclosure, my mortgage broker.”
“The other misconception, she says, is that you need a perfect credit score. A loan officer’s job is to confirm that you can afford the loan you are applying for and have a history of paying your bills on time. ‘We’re not looking for perfect credit for seven years,’ Sell says. ‘Everyone should shoot for that of course, but life happens.’”
“Being a newly minted homeowner doesn’t mean I’m swan-diving into a sea of cash, Scrooge McDuck-style. But, I hope to build equity that my future self will thank me for. My house is not the worst on the block, but it has required major work to make it home. I invite you to follow along as I rip out the carpets, learn how to install light fixtures (and how not to), mow my first lawn and play nice with the neighbors.”
The Daily Voice. “Foreclosure auctions in the U.S. are at an 11-year low — but not in New York. It’s quite the opposite, as foreclosure auctions are at an 11-year high, according to a new report by ATTOM Data Solutions. The District of Columbia and seven states posted a year-over-year increase in scheduled foreclosure auctions in 2017, including New York (up 9 percent to the highest level since 2006); Oklahoma (up 4 percent); Connecticut (up 7 percent); and Maine (up 2 percent).”
“‘The data for the Seattle market tells a very big story, and that is we are not seeing a housing bubble forming,’ said Matthew Gardner, chief economist at Windermere Real Estate. ‘With foreclosure rates at less than 0.4 percent of total housing units, the market is remarkably stable. That said, we are certainly suffering from serious affordability issues, but this is not translating into defaults on loans.’”
From KOMO News. “New numbers just released Thursday morning show the stunning jump in home values in the Seattle area since the bottom of the housing crisis. Zillow says home values are now 23 percent above the highest they were during the pre-recession housing bubble. Zillow says when the housing market crashed around 2009, homes in the Seattle area lost more than 31 percent of their value - on average dropping by around $119,000.”
“But since the local real estate market hit its bottom in November 2011, Seattle home values have gained almost 79 percent, or $206,400. And Seattle isn’t alone. The report says the typical U.S. home has gained 36 percent in value, and is now 5 percent more valuable than at the height of the housing bubble. West Coast markets have seen the strongest gains in home value - with San Jose, Calif., leading the pack with a $615,000 gain since 2011.”
From the Associated Press. “Like many Texans whose homes were flooded during Harvey, Jacob Lerma faces mounting expenses and hasn’t paid his mortgage in months. His insurance payment wasn’t enough to rebuild his home and he was only offered a small loan after applying with the Federal Emergency Management Agency. His last hope is a possible buyout from the city of Friendswood. In the meantime, he, his wife and two daughters will continue living with his parents.”
“‘If the buyout doesn’t work and more money doesn’t come from insurance, walking away from it might be our only option,’ said Lerma. ‘It’s just crazy to see this all taken away.’”
From the Wall Street Journal. “After looking at several houses along Alabama’s Gulf Coast, we decided the sunny cottage on Audubon Drive in Foley was the one — so long as the seller came down a little on the price. A week before Thanksgiving in 2005, we signed the papers to buy the house for $137,500. Twelve years later, little about my life remained the same. I’d left Alabama to take a job at The Wall Street Journal. But I was still sending mortgage payments each month to a bank in Alabama.”
“I would have sold the house long ago, and in fact I tried. But when the U.S. housing market collapsed in 2007, the property’s value fell far below the amount I borrowed to buy it. When I bought the house, I was a newlywed three years out of college, believing I had achieved a signature goal of most young Americans. Instead, I set myself up to pursue an inverted version of the American dream. Most young people aspire to buy their first home. I spent a decade trying to get rid of mine.”
“Toward the end of 2011, the Journal moved me to New York to write about Wall Street financiers. In that role I spoke in late 2013 with Stephen Schwarzman, CEO of Blackstone Group LP, about his firm’s huge bet on rental houses. At a private dinner, I joked with Mr. Schwarzman about being a tiny competitor of his. He made the bull case for owning rental homes. Then he leaned over, pointed at the ceiling and said, ‘Don’t sell your house.’ ‘Steve,’ I thought, ‘that won’t be a problem.’”
“I pulled up to the house in the early morning hours of April 1, 2017, for the first time since 2010. I was spent from the 20-hour drive from New York, but pleasantly surprised by what I saw. The house was in better shape than I had expected, though it had changed enough that it no longer felt entirely mine. Within a week, a retired couple from Minnesota agreed to pay $112,000. They waived an inspection and my Realtor volunteered to cut his commission to help make the deal happen.”
“The appraisal hit the mark, no termites turned up and the deal closed in May. From the original purchase in 2005 to last year’s sale, I lost $25,500. My losses as a landlord? At least $35,000. Whatever the sum, it no longer mattered. I was free.”
‘Being a newly minted homeowner doesn’t mean I’m swan-diving into a sea of cash, Scrooge McDuck-style. But, I hope to build equity that my future self will thank me for’
Do u think we will have another black monday?
Interest rates going up has a lot of speculators sh@tting in their pants. There is a lot of leverage in the market now.
How much of a fall starts margin calls?
Do your hands sweat heavily?
“Do your hands sweat heavily?”
He just hears voices.
https://www.youtube.com/watch?v=X6qzfJ1EG88
Great song, Jeff. I’ve not heard that one before.
Here’’s a pair for you. You know the artists, you may not know the songs. For what it’s worth:
Chilliwack - Fly At Night
https://www.youtube.com/watch?v=7nYvmm0Ofmc
Gary Wright - Blind Feeling
https://www.youtube.com/watch?v=8grPlMF3VWU
BTW, do you know of any online music forums where people discuss good music regardless of genre? I keep searching, but keep finding sites where people think Guns N Roses and Bon Jovi represent good music.
“I’ve not heard that one before.”
It was recorded in 1984 and was used in a Miami Vice episode.
I posted it because the song and video seemed to capture the mindset my friend azdude has had lately.
Thanks for posting your songs, I had actually never heard Chilliwack before, lead singer sounds like Neil Young.
Besides the comments on the youtube videos and the occasional discussion about a song that is posted here I don’t know of any other online music forums but if I find one you will be the first to know.
DOW and other headline Wall Street stock market index futures are down by over 200 points, suggesting that Monday could be another very bad day for stock market speculators.
Do you plan to HODL?
Correction: Stock index futures are down by over 2% (729 points in the case of the DOW).
Must … drink … coffee …
Foolish DebtDonkeys
Highland Beach, FL Housing Prices Crater 9% YOY
https://www.movoto.com/highland-beach-fl/market-trends/
Parker, CO Housing Prices Crater 8% YOY
https://www.movoto.com/parker-co/market-trends/
Dontcha love the media the sky is falling…. its the crash to end all crashes…. the end is near… because the dow drop 2.5% in one day
https://www.thestreet.com/story/14473663/1/dow-jones-industrial-average-crash.html
They’ve yet to understand one simple truth…… Nothing accelerates the economy and creates jobs like falling prices to dramatically lower and more affordable levels. Nothing.
“Remember, I can ask $50,000 for my three month old Bitcoin but where are the buyers at that price”?
….. Buy it later after prices crater for 95% less…… if it’s worth anything at all.
Or never if prices crash to $0 when it turns out that Bitcoin doesn’t actually exist and was just a scam…
I wonder if bitcoin’s mysterious and anonymous creator(s) was sitting on a huge pile (mined easily in the early days) and unloaded it on speculating chumps, making billions in the process.
It’s ridiculous, is it not, Andy? Idiotic media outlets such as MarketWatch immediately issue inflammatory comments such as “Worse Than Black Monday in 1987!” Few financial media outlets (if any) are as irresponsible.
That said, I am VERY pleased at the stock market developments this week. It’s about time. Some weak hands got chased out of the market. Excellent. I love seeing speculators being chased out.
I am hoping for another 5-12% decline in the coming weeks. Clear the markets somewhat of present day idiots. Rising interest rates and the reduction of QE equals increasing stability and normalcy in the markets and economy. The United States desperately needs both. Keynesian economic philosophy is destructive….perhaps we’re moving more in an Austrian direction. Sure looks that way; hopefully it turns out to be true.
The time has come for the Big Boy and Big Girl panted people to take over. And in all areas of our society. Thank you, Donald Trump!!
Did I “lose” money this week? Of course. Yet I’m still up significantly from two years ago.
I could lose 40% in the stock market this year and still be up 25% compared to December 31, 2015. I’d be very pleased to keep that 25% - and, infinitely more importantly - see strong push for a return of justice and individual liberty.
Time to BTFD and HODL.
What is this “HODL?”
Who knows and who cares.
HODL TLFK
Hold On for Dear Life
Till the Last of your Falling Knife
(or Till You’re F-K’d, if you prefer)
Wiki says:
HODL is a slang term and Internet meme that is used in the Bitcoin community when referring to keeping, i.e. holding onto the cryptocurrency rather than selling it.[1][2][3] It originated in a December 2013 post on the Bitcoin Forum message board by an apparently inebriated user who posted with a typo in the subject, “I AM HODLING.”[4][5][6] In 2017, Quartz listed it as one of the essential slang terms in Bitcoin culture, and described it as a stance, “to stay invested in bitcoin and not to capitulate in the face of plunging prices.”[7] The Street.com referred to it as the “favorite mantra” of Bitcoin holders.[8] According to the Financial Times, it was the reddit forum Buttcoin that helped popularize its use.[9]
Afterwards, people have also referred to it as a backronym meaning, “Hold On for Dear Life.”[10][11]
The Dow is still at an absolutely staggering 25,520. This bubble is so massive that the little blip this past week is almost unrecognizable in the grand scheme of things.
BSD, I am glad you post here.
I don’t normally copy over my previous posts, but a couple from late yesterday are highly relevant.
Stay tuned!
is it time to rinse the suckers from the markets? Have they made enough money yet?
Opinion FT
New Federal Reserve chief Powell a debt man walking
Yellen’s successor more sceptical of bank’s macro model and more aware of market risks
John Dizard
Jay Powell will not, at least initially, be able to voice his misgivings
“Meanwhile, we look like we are blowing a fixed-income duration bubble right across the spectrum that will result in big losses when rates come up down the road. You can almost say that is our strategy.”
The speaker is Jay Powell, US Federal Reserve chairman from Saturday, referring to large-scale asset purchases in the just-released transcript of the October 2012 Federal Open Market Committee meeting.
Is Mr Powell stepping into a dream or a nightmare? Becoming Fed chair should be a dream. Doors open as you approach, cars are waiting, calls are taken, grovelling is freely offered and no reservations are necessary.
This six-year-old transcript, however, shows he is more likely to feel he is in a “sleep paralysis” nightmare, where he is wide-awake but unable to move or speak.
Despite sensing the market “demons in the room”, he will, at least initially, be unable to move away from the dot-plot of rate increases or even voice his misgivings.
From the transcripts we can see that Mr Powell is more sceptical of the Fed’s macro model and more aware of market risks than his recent predecessors.
Gradually, the Fed staff have acknowledged the risks of sudden yield curve movements, or as the New York Fed called them, “convexity event risks”.
Too late. After the 2013 “taper tantrum”, the Fed board and the politicians behind it did not want the pain of a real market correction. Now they have no choice.
…
“Meanwhile, we look like we are blowing a fixed-income duration bubble right across the spectrum that will result in big losses when rates come up down the road. You can almost say that is our strategy.”
My understanding of that statement is something like, “When interest rates eventually normalize, bond investors are screwed, whether they own three month T-bills or thirty-year zero-coupon junk bonds, or anything in between in terms of default and duration risk.”
Does that seem about right?
The upside to this move towards thawing markets out of their cryogenic deep freeze is the hope that they may some day resume their normal role in efficiently allocating economic activity to high-value uses, a role which was severely undermined by the ultra-low rate policy of the past decade.
From you lips, PB…
This ZIRP/QE nightmare has been bad for those on fixed incomes (including savers, retirees, and regular wage workers).
It seems like a bell was rung at Janet Yellen’s retirement party which signaled the end of the drunkfest and the onset of detox. Got pink elephants?
If the Fed stays the course on the punchbowl removal operation, there’s gonna be a lot of sad panda real estate investors a few months from now, when they realize that the same policy shift which tanked Bitcoin, stocks and bonds similarly hammers the value of their leveraged real estate HODLings. All of these risk assets went up in lockstep during the easy money regime, so it should surprise noone when they simultaneously tank as the punchbowl is gradually withdrawn.
If the Fed stays the course on the punchbowl removal operation, there’s gonna be a lot of sad panda real estate investors a few months from now,
They’ve nationalized the mortgage finance market, putting all the risk on taxpayers via the GSEs*, FHA, VA, USDA, Ginnie etc. So, if the RE market sinks this time, they’ll be less impetus to bail it out. However the personal financial positions of the people who are making the decisions are also very important.
How have Yellen and Bernanke and other Fed executives positioned their financial holdings? How have connected politicians positioned their holdings? How about Lloyed and Jamie, and others who get invited to New York Fed meetings? Discovering that would be the most informative about the real thinking behind the current policy, as opposed to the theater presented to unwashed masses (”Keep calm and continue buying”).
—————————————
* In today’s summary, a Fannie exec talks about transferring risk to private insurers. Those “reinsurers” will almost surely be let off the hook in the event of a crisis. AIG went down faster than a [insert lewd joke here] as soon as there was non-trivial stress, so bond insurance is a bit of a joke. I see those entities as more of another giveaway to the FIRE sector.
“How have Yellen and Bernanke and other Fed executives positioned their financial holdings? How have connected politicians positioned their holdings?”
That’s a great question, which reminds me of Hank Paulson’s portfolio at the time of the 2007-2009 financial meltdown.
C-Nick
Hank Paulson became Sect of the Treasury July10, 2006. His appointment was made on the condition that he liquidate, prior to accepting the position, his entire financial portfolio ($500 million), tax free. In doing so the gov’t removed any future conflict of interest and in turn gave him close to a $250 million dollar gift.
People in power do not lose money.
So this old, old lady dies last year totally unknown to WallStreet. She bought 10,000 share of Chrysler at $7 when it collapsed and then sold it at $50. That didn’t make her dangerous. What made her dangerous was watching it collapse again and buying it AGAIN and selling it AGAIN.
After her first purchase I asked my mother why she bought a dead company. She hesitated and then replied: “Take out the garbage when you get a chance.”
A year later she bought another dumb purchase and my question again was greeted with the garbage detail.
Then there is my son who plays poker at the Hard Rock Cafe and pays his rent while he’s in school. I point out to him that what he’s doing is not ethical and he asks me about golf. “People spend thousands of dollars for a few hours of enjoyment hitting a white ball across greens,” he tells me. “What’s the difference between playing golf and playing poker for enjoyment? You do both for entertainment.” Fortunately he didn’t tell me to take out the garbage.
So it’s nice to know that folks are NOW on a moral quest. Does that include a POTUS spanking a porn star and fking her afterwards ?
What time did BTC spike down?
What time did ETH spike down?
Which people were they targeting?
Do you really think Goldman can “bluff” Millennial poker players who bought in the double digits?
As an aside:
So no is concerned that the FED is telling WellsFargo to replace Board members?
Alphonso, My vague recollection is that Big Hank traded his stock portfolio for Treasuries, which did great over the 2007-2009 period. If anyone can find evidence, I’m interested…
C
They parked his money in Treasuries. A sweet deal. A tax-free card was the same as a billion dollar portfolio taxed at 50%.
The (((tribe))) couldnt get it done with fake russian dossiers, softball game massacres, or parking trucks on train tracks so they’re going to try blowing up the markets. They ran it up on nothing and now that they’ve exited the building they think they’re absolved of all blame, even though time after time after time they were the ones who created and nurtured these bubbles which destroyed our economy, our legal system and our culture.
Look at citadel and the rest of these lenders that are offering up to 3 MILLION to people who can fog a mirror. (((Shylocks))), most. I’m no longer surprised - honest work is not something most of them are capable of, instead choosing a life of evil and deceit.
“Today we don’t do that. We now transfer a very significant part of that credit risk to private capital. In other words, we’re essentially getting reinsurance on what we have. So people have the impression that Fannie and Freddie are continuing to take all this risk. We still take some risk, but we are transferring a very very big part of that risk to private capital.”
Has the federal guarantee on GSE debt been rescinded? Or is it safe to assume that GSE debt remains too big to fail, as was demonstrated in the 2007-2009 financial crisis?
“So people have the impression that Fannie and Freddie are continuing to take all this risk. We still take some risk, but we are transferring a very very big part of that risk to private capital.”
About 15 years ago the chief economist from one of the GSE’s gave a short presentation at my business school. It was a practice presentation for him and he said he used the deck to do presentations to European fixed income investors, specifically German investors.
My takeaway was that back in 2003 the GSE’s were raising money overseas to fund U.S. Mortgages.
If you dig into the financial statements of your money market instruments, I think you’ll find that it holds a significant amount of issuances by the GSE’s.
Like it or not, virtually everyone has a dog in this fight.
The pimping of MBS overseas has never been more evident. These are basically junk bonds but I’m certain the suckers buying this junk have no idea.
Porf.
(Transfer of r’isk)
There is an article on Freddie’s website saying the exact same thing with a detailed explanation on how it worked. I glanced at it and got bored.
Did the Bitcoin tether break last week?
What is a Bitcoin tether?
Buttcoin tether is simply an enema.
It’s Bitcoin’s brother from another mother.
https://www.wired.com/story/why-tethers-collapse-would-be-bad-for-cryptocurrencies/
“It’s Bitcoin’s brother from another mother.”
It certainly is, Professor Bear.
The Hindenburg was tethered right before it vaporized.
Bungee jumping fools are tethered….. then the lanyard breaks.
“Bungee jumping fools are tethered…”
Or not (knot?) …
Watch “Video: Somebody forgot to tie the bungee cord” on YouTube
https://youtu.be/z-2E4n6b-jI
That video offers a very convincing argument for only bungee jumping above calm, deep water.
Technology
What is Tether, what is its link with Bitfinex and why should Bitcoin investors be worried?
By Chris Graham
3 February 2018 • 7:37am
A huge advertisement of Bitcon is displayed near a train station in Tokyo Credit: AP
Given the volatility of Bitcoin in recent months, the appeal of a cryptocurrency dubbed a “stable coin” is understandable.
That was the thinking behind Tether when it was first launched in 2015. Yet the reliability of the digital currency is now being questioned, raising fears it could severely affect the price of Bitcoin and impact many exchanges.
The announcement that the US Commodity Futures Trading Commission sent subpoenas on December 6 to virtual-currency venue Bitfinex and Tether rattled investors, sending the bitcoin price down to two-month lows.
Here’s what you need to know about the mysterious currency.
What is Tether?
Tether, also known as USDT, is a cryptocurrency that started trading three years ago. The company behind it claims it is pegged to the US dollar. As such, it is intended to have the stability of the dollar but the ability to be used as a digital currency.
http://www.telegraph.co.uk/technology/2018/02/01/tether-link-bitfinex-should-bitcoin-investors-worried/
I feel like Matt Levine’s musings on cryptocurrency are quite apropos:
I am becoming increasingly convinced of my thesis that the story of cryptocurrency is not one of re-learning all of the lessons of modern capitalism, but of un-learning them. Here in the 21st century, I assumed that the purpose of currency was to intermediate between different goods and services, to make them fungible and commensurable, so that people didn’t constantly have to negotiate the exchange rate between yams and goats, or between goats and dentistry. Who decided that the problem with dentistry is that it needs its own currency? In 50 years, I will reminisce to my grandkids about the olden times, when there was a single currency that you used to pay for food and rent and cloud storage and heroin and dentistry. “Wow, grandpa,” they will say, “that sounds … actually really convenient?”
Since cryptocurrency’s utility so far has been limited to speculation, fraud, and providing a medium of exchange for criminal activities, I am missing the relevance of Matt’s musings.
Author: Sandra Upson
business
01.30.18
03:09 pm
Why Tether’s Collapse Would Be Bad for Cryptocurrencies
Tether, which is supposed to be pegged to the dollar, plays a key role in stabilizing cryptocurrency exchanges.
The cryptocurrency world, with its volatility, is all about FUD—fear, uncertainty, doubt. And nothing is generating more FUD right now than an unusual currency called tether.
Unlike bitcoin and its many siblings, tether is what is called a stablecoin, an entity designed to not fluctuate in value. With most cryptocurrencies prone to wild swings, tether offers people who dabble in the market the option of buying a currency that its backers say is pegged to the US dollar. Trading bitcoin for dollars at a bank can be cumbersome and costly; by comparison, acquiring tether is simple, cheap and fast.
But in recent weeks a chorus of skeptics has called into question nearly everything about tether. The root of the controversy is whether the company behind it, also called Tether, is telling the truth when it claims that every unit in circulation is matched by a US dollar it holds in reserve. If the company has a dollar for every tether, that means in theory any holder can sell tethers back to the company for an equal number of dollars at any time. This belief keeps the value of a tether pegged to a dollar.
Critics on Twitter, Reddit, in blog posts, and at a recent bitcoin conference have been demanding that the company prove its reserves through external audits. Not only has Tether failed to do so, last week it confirmed rumors that it had severed ties with Friedman LLP, the accounting firm on tap to perform those audits. On Tuesday, Bloomberg reported that the US Commodity Futures Trading Commission had sent subpoenas to Tether. A Tether spokesperson said, “We routinely receive legal process from law enforcement agents and regulators conducting investigations. It is our policy not to comment on any such requests.” The spokesperson declined other comment.
If tethers are not backed by a matching number of dollars, then Tether can print an arbitrary amount of money. (Other cryptocurrencies, by contrast, create new tokens according to strictly prescribed, predictable rules.) Other problems ensue, including suspicions that Tether is timing the release of new tethers to coincide with drops in the price of bitcoin and then using those tethers to scoop up bitcoins. Some observers fear that these purchases are artificially inflating the price of Bitcoin.”
Why Tether’s Collapse Would Be Bad for Cryptocurrencies
Tether, which is supposed to be pegged to the dollar, plays a key role in stabilizing cryptocurrency exchanges.
Unlike bitcoin and its many siblings, tether is what is called a stablecoin, an entity designed to not fluctuate in value. With most cryptocurrencies prone to wild swings, tether offers people who dabble in the market the option of buying a currency that its backers say is pegged to the US dollar. Trading bitcoin for dollars at a bank can be cumbersome and costly; by comparison, acquiring tether is simple, cheap and fast.
But in recent weeks a chorus of skeptics has called into question nearly everything about tether. The root of the controversy is whether the company behind it, also called Tether, is telling the truth when it claims that every unit in circulation is matched by a US dollar it holds in reserve. If the company has a dollar for every tether, that means in theory any holder can sell tethers back to the company for an equal number of dollars at any time. This belief keeps the value of a tether pegged to a dollar.
Critics on Twitter, Reddit, in blog posts, and at a recent bitcoin conference have been demanding that the company prove its reserves through external audits. Not only has Tether failed to do so, last week it confirmed rumors that it had severed ties with Friedman LLP, the accounting firm on tap to perform those audits. On Tuesday, Bloomberg reported that the US Commodity Futures Trading Commission had sent subpoenas to Tether. A Tether spokesperson said, “We routinely receive legal process from law enforcement agents and regulators conducting investigations. It is our policy not to comment on any such requests.” The spokesperson declined other comment.
If tethers are not backed by a matching number of dollars, then Tether can print an arbitrary amount of money. (Other cryptocurrencies, by contrast, create new tokens according to strictly prescribed, predictable rules.) Other problems ensue, including suspicions that Tether is timing the release of new tethers to coincide with drops in the price of bitcoin and then using those tethers to scoop up bitcoins. Some observers fear that these purchases are artificially inflating the price of bitcoin. “It’s possible that a nontrivial rise in the price of bitcoin and other cryptocurrencies has come from this asset being printed possibly out of thin air, and that is very concerning,” says Jill Carlson, a former Wall Street trader who now invests in and consults for cryptocurrency startups.,” says Jill Carlson, a former Wall Street trader who now invests in and consults for cryptocurrency startups.
Thank You for those posts. They have worked well in furthur convincing me (not that further convincing was really necessary 😁) that this cybercurrency mania is evidence that some sort of group psychosis is at work on Planet Earth.
And that there’s more than one group suffering from a psychosis.
I smells me a significant rat.
Re all things BitCoin. One wonders how much money Deep State has invested in it. Not for profit (although they would certainly would not turn that down) but for destruction. Have they interest in it? If so, how much?
Don’t be quick to ascribe a powerful conspiracy when simple idiocy will explain.
LOL. Yes. Idiocy certainly explains a great deal.
SHOCKING: Cyber Security Expert Claims “Bitcoin Created by U.S. Government”
By Dent Research
Cyber security expert Natalya Kaspersky–– co-founder of cyber security firm Kaspersky Lab–– just made a shocking announcement revealing the unsettling truth about Bitcoin.
“Bitcoin is a project of American intelligence agencies” she said during a presentation at ITMO University in St. Petersburg, Russia.
And if it’s true… if Bitcoin was in fact created by the FBI, CIA, or NSA… it could have dramatic consequences for investors around the world.
https://harrydent.com/exclusives_new/cyber-security-expert-bitcoin-created-by-government/?z=847149
“If tethers are not backed by a matching number of dollars, then Tether can print an arbitrary amount of money. (Other cryptocurrencies, by contrast, create new tokens according to strictly prescribed, predictable rules.) Other problems ensue, including suspicions that Tether is timing the release of new tethers to coincide with drops in the price of bitcoin and then using those tethers to scoop up bitcoins. Some observers fear that these purchases are artificially inflating the price of bitcoin. “It’s possible that a nontrivial rise in the price of bitcoin and other cryptocurrencies has come from this asset being printed possibly out of thin air, and that is very concerning,” says Jill Carlson, a former Wall Street trader who now invests in and consults for cryptocurrency startups.”
Wow, just wow. Imagine if this is true. It would explain everything, not only in the rise of Bitcoin, but all of this mysterious “money” which is pouring in to acquire Bitcoin as it crashes, leading to sucker rallies like today.
Tether is timing the release of new tethers to coincide with drops in the price of bitcoin and then using those tethers to scoop up bitcoins.
oh brother.. if they’re really doing that, the collapse will be absolutely fierce when it happens. it will be a ‘bang’ not a whimper. bittulip on steroids.
Bitcoin’s January fall wipes off $44bn in value
US investigation into boom stokes fears of impending bust as cryptocurrency records steepest monthly slide in its history
Alex Hern and Richard Partington
Fri 2 Feb 2018 02.10 EST
First published on Thu 1 Feb 2018 13.30 EST
Bitcoin plummeted in value by more than $44bn (£30.9bn) in January, marking the steepest monthly fall in its short history.
The slide extended further on Thursday after the Indian government said it would ban all cryptocurrency trading and Facebook announced a ban on digital currency adverts. Bitcoin fell by more than 10%, dropping below $9,000, marking a sharp reverse from its peak of almost $20,000 just before Christmas.
Economists have repeatedly warned of a bitcoin bubble after the price of the cryptocurrency surged last year by more than 900%.
The latest fall comes after news that one of the largest cryptocurrency exchanges is being investigated by US regulators over its links to a digital asset which, detractors fear, could be inflating the price of bitcoin by billions of dollars.
The US Commodity Futures Trading Commission has been investigating the Bitfinex exchange and digital asset Tether since at least early December, when it subpoenaed both companies, according to a Bloomberg report published on Wednesday.
https://www.theguardian.com/technology/2018/feb/01/bitcoins-january-fall-wipes-off-44bn-in-value
It’s turtles all the way down.
U.S. Regulators Subpoena Crypto Exchange Bitfinex, Tether
By Matthew Leising
January 30, 2018, 9:52 AM PST
Updated on January 30, 2018, 5:26 PM PST
- Firms say they routinely get ‘legal process’ from regulators
- Tether has yet to verify that it holds $2.3 billion in reserve
Crypto Exchange Bitfinex, Tether Are Said Subpoenaed by CFTC
U.S. regulators are scrutinizing one of the world’s largest cryptocurrency exchanges as questions mount over a digital token linked to its backers.
The U.S. Commodity Futures Trading Commission sent subpoenas on Dec. 6 to virtual-currency venue Bitfinex and Tether, a company that issues a widely traded coin and claims it’s pegged to the dollar, according to a person familiar with the matter, who asked not to be identified discussing private information. The firms share the same chief executive officer.
Tether’s coins have become a popular substitute for dollars on cryptocurrency exchanges worldwide, with about $2.3 billion of the tokens outstanding as of Tuesday. While Tether has said all of its coins are backed by U.S. dollars held in reserve, the company has yet to provide conclusive evidence of its holdings to the public or have its accounts audited. Skeptics have questioned whether the money is really there.
https://www.bloomberg.com/news/articles/2018-01-30/crypto-exchange-bitfinex-tether-said-to-get-subpoenaed-by-cftc
So some of the bitching about the U.S. dollar is that it is considered to be unbacked. So to alleviate this concern a new currency is established that offers up the quality of being backed by the dollar - a currency that is considered to be unbacked.
But (the horror) there just may not be enough of these (unbacked) dollars stashed away to back this new tether currency but nevertheless people want to get out of dollars and into this new currency and will willingly pay hefty fees to do so.
Do I understand this correctly?
You can rest assured that your Bitcoin HODLings are guaranteed by dollar-backed USDTs. So backup the truck and BTFD on tethered Bitcoin before the price rockets back up.
The obsession continues….
You do realize that VERY few people even know what BitCoin even is, and that even fewer sank their money into it?
There are quite a few other, more important subjects to talk about than BitCoin. It seems you’ve either been sucked into it yourself, or you’re trying hard to shift attention away from what is actually important.
LMFAO!
Yep. It’s Professor Bear. Also known as Getstucco. Also known as Cantankerous. Now CryptoNick. Also known as: *fill in the blank*.
He can’t seem to be honest/forthright/transparent in his dealings, not even online.
You have a serious problem, Bear. Get help.
I loosed some money this week. Been waiting two years for the right window of opportunity. Beautiful blocks of snow white Holly. Can only be cut in the dead of winter and milled before the temperatures rise or it turns blue.
RGCG
RaGe CaGe
You do realize that VERY few people even know what BitCoin even is, and that even fewer sank their money into it?
I had to explain to a relative that Bitcoin has no physical form. A lot of people see pictures of those cute coins with the B’s on them and think that is Bitcoin. When you explain it to them, their eyes glaze over. “Block what? Crypto? What’s that?”
I’ve been waiting, too, Skye. Other than dollar cost averaging money into the market via work, I haven’t put any money to work since April 2016.
This may or may not last a while. Who knows. A true pullback/correction typically lasts 3-6 months. Guess we have yet more time to wait.
Is this another 1994 in the making? Seems to be some resemblance.
I read a WSJ article a couple of weeks ago about annoyed friends and families exhausted from hearing about bitcoin from its evangelists (Let Me Tell You Some More About BitCoin–Hello? Hello?). One of the quotes was from a grandmother who thought it was BigCoin, as in a really really big coin.
BitCoin is the perfect vehicle for manic depressives.
Whoever CryptoNick is would have been better using the handle CryptoNight unless of course you are equating nick with nickname, in which case I reward you a few points but not as many had you used CryptoNight (or CryptoNite)
And now that I’ve mentioned it, its coolness no longer exists so no points will be granted.
“Cryptonic,” as I understand it, is another player in the crypto space. So, “CryptoNick” is a witty moniker in that “Nick” is a common first name, but there’s no distinction from “Cryptonic” when saying it out loud. Just my own interpretation, of course…
What they’re going to find is that this entire crypto bubble is built upon massive fraud, insider fraud. Google “can’t get my money from x (insert crypto exchange here)” to see what’s really going on. There are people saying that they logged onto their accounts only to find the name was deleted and they had no way of cashing out or doing anything. When they call and email support they are completely ignored. It makes Bernie Madoff appear saintlike.
The story isn’t complete without the idiot explaining that he is unemployed and lost however many tens of thousands that he borrowed from friends and family.
Not to mention all the amounts borrowed on credit cards and home equity loans to buy Bitcoin, much of which probably went to money heaven over the past few weeks…
Who’s left holding the bag if these monies can’t be repaid?
Who’s left holding the bag if these monies can’t be repaid?
it’s obviously bitcoin owners, isn’t it? unless for some reason the government wants to bail people out. in that case the taxpayers will be holding the bag.
Probably bitcoin holders. But if there are a bunch of speculators that are buying on credit cards and HELOC and then just decide to walk away and declare bankruptcy, the banks could end up on the hook for extending credit that was used speculatively.
the banks could end up on the hook for extending credit that was used speculatively.
does that mean that the bitcoin holders are no longer on the hook? is it ‘catch and release’ for the banks? i hope you see what i’m getting at.
Well, they are on the hook, until they default on their credit card debts, which is why banks are doing this:
“Allowing purchases of cryptocurrencies can create big headaches for lenders, which can be left on the hook if a borrower bets wrong and can’t repay.”
https://www.bloomberg.com/news/articles/2018-02-02/bofa-to-decline-all-cryptocurrency-transactions-on-credit-cards
“Allowing purchases of cryptocurrencies can create big headaches for lenders, which can be left on the hook if a borrower bets wrong and can’t repay.”
allowing purchases??? control much?
how ’bout the lenders allowing those risky, dangerous loans? should they be allowed to make the loans?
sounds like some pretty dumb lenders that will deserve all the defaults they get. they SHOULD lose their butts. however, i really get the feeling they’ll claim that ‘no one could have seen it coming’ and start crying for bailouts.
Agreed. That is the great thing about bankruptcy laws. Those “stupid” borrowers and speculators are partly for blame for heading headlong into stuff they should never have touched in the first place. And at the same time, it is impossible to pin all the blame on the idiots who are buying bubble assets. This is only enabled by lenders willing to lend to stupid borrowers. I don’t know what is worse, stupid borrowers, or stupid lenders who are enabling these stupid borrowers. At least bankruptcy is a check on stupid lenders who are lending to stupid borrowers who are gambling.
At least bankruptcy is a check on stupid lenders who are lending to stupid borrowers who are gambling.
yes, and the stupid borrowers’ losses are their only restraint. they are the first link. they are the ones seeking out the stupid loans. the more they learn their lessons, the fewer loans will be sought. and the more the banks learn their lessons, the fewer loans will be approved. just don’t bail anyone out.
At least bankruptcy
isWAS a check on stupid lenders who are lending to stupid borrowers who are gambling.Not any more.
“Did the Bitcoin tether break last week?”
I don’t know, Professor Bear. Did they?
Did someone unlock the key to your rage cage?
You have a serious problem, Bear. Get help.
Bitcoin has rocketed up an eye-popping 20% since its low of ~$7,720 yesterday. It’s at ~$9,300 as I type.
This is the “suck ‘em in” part of the “suck ‘em in, shake ‘em out” process.
Afterwards the pendulum will swing back and the “shake ‘em out” part will prevail.
Same old story.
I’m curious…what was your handle before you started posting as Mr. Banker?
I’m curious…why are you so obsessed about anonymous blog handles? Is your OCD kicking up again?
Is your OCD kicking up again ??
IT is a lonely sick puppy.
Now and then I like to dress up in drag and come out of the closet as David Lereah.
Now and then I like to dress up in drag and come out of the closet as David Lereah.
interesting combo.
Ahhh, fame; There is nothing that compares to it. Nothing.
https://theamericangenius.com/business-marketing/where-are-they-now-david-lereah-former-nar-chief-economist/
Why are YOU responding Bear/ Crypto/ Cantankerous/ Stucco? Feeling some pressure, are ya?
Is Mr Banker upset by my question? How do you know?
It’s not as if he responded. Or did he?
Well, you did respond.
And with a wonderful response. Thanks, David. Now, be away with you! I saw enough of you 10 years ago….
*******
Professor Bear/ GetStucco/ Cantankerous/ CryptoNick/ I don’t remember, but there was a fifth / #6??? / #7???
Stay tuned everybody. More handle changes and duplicity to come! And it IS duplicity, unless such changes are publicly announced. This past week it was Mighty Mike/ Tea Party Patriot. Now, it’s Bear. AGAIN.
To the newbies here: Some time ago, Ben asked that we stick with one handle name, because changing them creates unnecessary work for him behind the scenes.
For the newbies here, Ben asked us to refrain from political discussions and personal attacks.
And if you get the Joshua Tree extension, you can screen out the posts of those who ignore this request, such as MacBeth.
“Mr. Banker” is “Combotechie.”
“Mr. Banker” is “Combotechie.”
I thought tj said that already, but in a rather delightful double-entendre sort of way:
Technology
Tech Tent: Will crypto-crime end the Bitcoin bubble?
Rory Cellan-Jones Technology correspondent @BBCRoryCJ on Twitter
2 February 2018
On Friday, Japanese regulators staged a raid on the offices of Coincheck, a crypto-currency exchange that has been hit by what could be the biggest bank heist in history.
On the Tech Tent podcast this week, we ask whether a crime wave hitting the crypto-currency industry is sapping confidence in the whole project.
The Japanese regulators wanted to know just what kind of security measures were in place when hackers stole $530m (£375m) worth of crypto-currencies from Coincheck.
On Tuesday, America’s Securities and Exchange Commission (SEC) received a court order to close down an initial coin offering (ICO), which encourage people to buy into new crypto-currencies before they launch, which was aiming to raise $1bn. The SEC said the plan to create a new currency to fund what was called a decentralised bank was a scam.
And this week, the cyber-security firm Digital Shadows produced a report on the latest fashion in cyber-crime: profiting from the crypto-currency boom.
The report - titled The New Gold Rush - details the various types of scam, from fake ICOs to raids on exchanges to simple phishing attacks. Its author, Becky Pinkard, tells Tech Tent that cyber-criminals have decided to jump on the bandwagon as the frenzy of popular excitement about the rise in value of Bitcoin has grown.
“We have people all the way down to my grandmother asking about Bitcoin and what it means and whether I can make money from it,” she says.
“What that does is then create the type of exposure that criminals need in order to come in and take advantage of folks who don’t really know what they’re doing.”
Digital Shadows has been scouring criminal forums on the dark web and has found plenty of conversations about ICOs - and how to profit from them.
“Just set it up, people will come and they will drop the money on you,” said one comment.
http://www.bbc.com/news/technology-42917172
“What that does is then create the type of exposure that criminals need in order to come in and take advantage of folks who don’t really know what they’re doing.”
Sounds a bit like banking.
“`Just set it up, people will come and they will drop the money on you`, said one comment.”
Bahahahahahahaha … it sounds EXACTLY like banking.
“It’s possible that a nontrivial rise in the price of bitcoin and other cryptocurrencies has come from this asset being printed possibly out of thin air, and that is very concerning,”
…a nontrivial rise in the price…has come from this asset being printed possibly out of thin air,…
This is somehow vaguely reminiscent of banking as well!
Bitcoin
J.P. Morgan CEO Jamie Dimon Now Says He Regrets Calling Bitcoin a ‘Fraud’
Jamie Dimon: You’re Wasting Your Time With Bitcoin
The JPMorgan Chase CEO explains why he doesn’t believe the digital currency will become a major player.
By Reuters January 9, 2018
JPMorgan Chief Executive Jamie Dimon regrets calling bitcoin a ‘fraud’ but added that he still is not interested in the cryptocurrency at all, he said in an interview on Fox Business on Tuesday.
Dimon had called bitcoin a fraud at a bank investor conference in New York in September. “The currency isn’t going to work. You can’t have a business where people can invent a currency out of thin air and think that people who are buying it are really smart,” he had said.
…
Sounds like fraud boy bought some Sh!tcoin.
Prof Bear—-
Thanks for the find. It vindicates what I posted earlier last month. The big boys wanted a piece of the action. They used their Christmas bonus money to enter the race. The BTC of two months ago is NOT the BTC that you are looking at now.
Fortunately the TA people from a generation ago are in the room now.
Remember—
Jamie Dimon shorted silver so his folk were whispering, “Why not ? Jamie.”
Bitcoin
Bitcoin Newbies Are Getting Crushed
A bitcoin automated teller machine at the Coin Trader bitcoin retail store in Tokyo, Japan, on Aug. 30, 2017.
Tomohiro Ohsumi—Bloomberg/Getty Images
By Bloomberg February 3, 2018
For Bitcoin investors, these are the times that try one’s soul.
After surging to almost $20,000 in December following the introduction of regulated futures contracts in the U.S., the world’s largest cryptocurrency has lost more than half its value, plummeting to as low as $7,614 on Friday. It regained some ground on Saturday, rising 7.5 percent to $9,290.15 as of 2:58 p.m. in New York, according to coinmarketcap.com.
Particularly hard hit have been those who got swept up in the mania just before what skeptics ranging from Jamie Dimon to Nouriel Roubini have labeled as one of the biggest asset bubbles in history began showing signs of deflating. Selling by “weak hands,” as latecomers are sometimes called across the investing world, contrasts with the view of early advocates pledging to HODL — one frenzied trader’s misspelled entreaty to hold onto the tokens during an earlier rout that’s become the mantra of Bitcoin purists.
Bitcoin’s rise in mainstream consciousness was brought on in part by retail investors’ fear of missing out after viewing the approval of futures as an endorsement by the establishment. As more novice investors jumped in, Bitcoin shot above $10,000, then $15,000, then as high as $20,000 on some exchanges, in a span of only a few weeks.
Some of Bitcoin’s biggest backers even warned the euphoria had gotten out of hand. Billionaire Mike Novogratz, who shelved his plans to open a $500 million cryptocurrency hedge fund and instead wants to build a crypto merchant bank, warned that Bitcoin would fall to as low as $8,000. Thomas Lee of Fundstrat said the cryptocurrency would slide to as low as $9,000 before shooting back up.
Recent hacks and tightening regulation have “weighed on confidence,” Lee said in a telephone interview Friday. “Investors are staying on the sidelines until there’s some visibility, but nothing fundamental has changed. It’s healthy; you need drawbacks sometimes as nothing goes up in a straight line.”
http://fortune.com/2018/02/03/bitcoin-newbies-are-getting-crushed/
The “Inland Revenue Service” wants to know how much dollar revenue you made last year from selling your Bitcoin HODLings.
Cryptocurrencies
Bitcoin investors find tax demands are not virtual
Cryptocurrency traders in many jurisdictions may be liable for hefty CGT bills
Ben McLannahan in New York and Vanessa Houlder in London 2 hours ago
myFT
Cryptocurrency converts across the US have had to contend with zigzagging prices and glitch-prone exchanges. Now comes another problem: the tax authorities.
Hundreds of thousands of newcomers swarmed into bitcoin and other digital currencies last year, sending prices soaring. But as the 2018 tax-filing season arrives, many may be unaware that they could need to write a cheque to the federal government.
Four years ago the Inland Revenue Service said that virtual currencies should be treated the same as property and thus liable for capital gains tax.
For investors who cashed in before December 31 and spent the profits, “it could be a pretty sobering awakening”, said Mike Slack, an analyst at H & R Block, a tax-preparation company.
Despite a slump in prices — Bitcoin fell below $8,000 yesterday, down almost 60 per cent from its December high — crypto-fever remains strong.
When a free stock-trading app called Robinhood recently said it would offer commission-free trades in a variety of cryptocurrencies, more than 1m people signed up within just four days.
Meanwhile, crypto exuberance has spilled into unconventional stocks more broadly.
Tim Hockey, chief executive of TD Ameritrade, a leading US online broker, said he had “never seen this absolute level of trading”, noting particular interest in shares related to blockchain technology and cannabis.
The IRS has long been concerned that gains from trading cryptocurrencies are being under-reported.
“Taxpayers who do not properly report the income tax consequences of virtual currency transactions can be audited for those transactions and, when appropriate, can be liable for penalties and interest,” the IRS said.
“I pulled up to the house in the early morning hours of April 1, 2017, for the first time since 2010. I was spent from the 20-hour drive from New York, but pleasantly surprised by what I saw. The house was in better shape than I had expected, though it had changed enough that it no longer felt entirely mine. Within a week, a retired couple from Minnesota agreed to pay $112,000. They waived an inspection and my Realtor volunteered to cut his commission to help make the deal happen.”
“The appraisal hit the mark, no termites turned up and the deal closed in May. From the original purchase in 2005 to last year’s sale, I lost $25,500. My losses as a landlord? At least $35,000. Whatever the sum, it no longer mattered. I was free.”
Is it a fairly typical experience for individual real estate investors to hang on to a house that they don’t want or need for seven years before selling at a massive loss?
“Is it a fairly typical experience for individual real estate investors to hang on to a house that they don’t want or need for seven years before selling at a massive loss?”
Hmmmmmmm … I ran across this on the net …
“The average length of a marriage that ends in divorce is eight years.”
Eight years is not seven years but it is close. Getting out of a marriage at a loss is not the same as selling an investment at a loss but it is close in the sense that it takes time (seven or eight years) to finally decide to throw in the towel.
Maybe. Something to think about.
FWIW and all that.
Hence the age old term “seven year itch”. Some things never change.
Some places it takes a year after filing paperwork to get a decree.
But this dude held on to a house in Alabama for seven years after moving to New York…quite a bit different than an incompatible couple battling it out for seven long years in a shared domicile. It makes you wonder just how far underwater he was at the worst point.
I listened to the original article on my run last week. Apparently the writer didn’t walk away from it due to a sense of moral obligation. Also, his ex-wife was still on the deed of the property and it seems like he mentioned that walking away would have harmed her considerably. He ended up buying the property again (or refinancing) to extricate his ex-wife from the property, but then he just kept a hold of it. It seems like he was worried about how the ding on his credit would impact his employment prospects as well.
That’s interesting. I happen to have the dead tree copy of the article handy, which you just convinced me to read.
I read the entire article during my workout. It was a well-written article and provides insight to just how badly the housing crash hammered some communities. It was almost as though every imaginable bad thing that could have happened to the neighborhood, did.
There is a saying about boaters: The two happiest days in their lives are the days they buy their boat and later when they sell it.
I think this can be applied to landlords as well.
My happiest days on the boat were the last 15 years.
Is it a fairly typical experience for individual real estate investors to hang on to a house that they don’t want or need for seven years before selling at a massive loss?
I know many people who have moved without selling their house. They all say they did it for investment purposes, but I suspect it’s because they couldn’t get out from under the mortgage without bringing money to the table. In one case the person actually told me the truth (although they tell others the investment tale.)
I also know of several cases of people who have not gotten a divorce because they couldn’t afford to split their assets. Some of them live apart from their spouses and date others (buyer beware); some still reside in the same dwelling (although not really as man and wife).
I hear that story all the time. The verbal gyrations they come up with to avoid admitting they’re losing their ass is priceless.
It is pretty well established in the sociology literature that when an economy recovers the divorce rate increases. During a recession/depression, many people who would get a divorce, but who cannot afford to, stay in arrangements they find less than ideal.
I’ve heard this many times when it comes to deciding to get divorced and weighing out the financial implications, “it’s cheaper to keep her.”
“it’s cheaper to keep her.”
One of the final straws was when those exact words came out of my ex’s mouth. No amount of money is worth continuing to host a parasite that has made it clear that’s all the relationship is. I’m still paying but it’s from a blissfully long distance away. And it’s now a fixed cost.
The great minds of the mortgage market continue to work overtime, coming up with fresh ideas in an effort to reach more would-be homebuyers. Pilot programs like these don’t always prove worthwhile; in fact, some never make it beyond the testing stage. But they show the lengths to which lenders are willing to go for new buyer
———————-
If housing prices were lower you’d sell more mortgages. Instead of creating different pilot programs why not just approve the people for what they can afford and not a penny more?
Lower approvals = lower housing costs = more buyers = more mortgages.
So long as the housing mania continues to rage, using innovative subprime lending schemes to qualify buyers for purchase of overpriced houses they cannot afford will seem perfectly natural.
Applicants need two years of continuous employment, plus a voice verification of employment on the day the loan closes. They must also confirm they have enough money on hand for at least a 25 percent down payment, though no other proof of income is necessary.
This sounds like a no income no asset loan from 2006(NINA)
From what I read they just verify employment NOT Salary (Strawberry pickerwith $900,000 mortgage ring a bell?)
Now they do need to put down 25% but with a HELOC they can pay back the guy who lent them the 25% downpayment and life is good. (Until it is not!)
The great minds of the mortgage market continue to work overtime, coming up with fresh ideas in an effort to reach more would-be homebuyers.
The big picture question is, how do you load more debt on individuals and guarantee the cashflow to lenders? Lee Iacocca talked about pioneering financing for cars back in the 50s, which led to his first big break.
Basically, you socialize/nationalize the risk and losses, and privatize the profits. The core of this has already been done with the last financial crisis. Now it seems it’s just a question of how low quality a loan is the government willing to buy. That’s the tuning dial.
These are very smart, well-connected people, persuasive people trying to do this. But I think they’re 90% of the way to privatizing the profits and socializing the losses. I guess the last 10% is now what they’re working on.
Back at the Great Depression, when Fannie was created (1938), the government had two routes to take: nationalize the banks, make them a government entity, or try to insure the system, nationalizing the risk created by a privately-directed system. People like Greenspan claimed to believe the system would regulate itself (he later admitted he was wrong) They chose the latter. I’ve felt for a long time that the post-2008 financial crisis model was the ultimately goal that was started with the creation of Fannie - fully privatizing the profits, fully socializing the losses.
I guess there’s nibbling at the edges to be done, to squeeze more profit out of the system now in place.
Because seriously, would any private profit-making entity buy a 400K mortgage created by a couple making 50K on a humble house who are desperately trying to get a piece of that rising real estate market?
I posted a Zillow link a while ago, to a very expensive zip code in DC, which had the ‘blue measles’ - many times the number of foreclosures as the number of houses for sale. That’s a common sight in DelMarVa.
The big picture question is, how do you load more debt on individuals and guarantee the cashflow to lenders?
You do what these idiots are doing by trying to find a way to expand more loans to more people. Get MOAR people to qualify! Lower credit scores, no income verification, one call to your employer to see if you work there. Seems like a poor way to run a high end business, because selling 30 year fixed products to people who may or may not qualify is boring. We need a different way to do this, hence these pilot programs.
And yet…somehow…..it’s different this time.
“Skin in the game” was the mantra back in 2008. Forcing lenders to retain some repayment risk so that they’d at least experience a modicum of inconvenience if they generated bad debt.
In a truly remarkable victory, the FIRE sector was able to fight this off, and this core perverse incentive to create bad debt was left untouched. If you google “QRM risk retention”, it’s an informative read. On top of that, they obtained “safe harbor”, which was further insulation - basically once the government buys the loan, they can’t return it to you if there are defects. This is what you get when a former Goldman Sachs CEO orchestrates the response to a financial crisis.
Because there is no risk retention for QRM, it makes them dangerous, and no profit-making entity is going to want to touch them without a government guarantee.
The difference today is that risk from real estate has been almost fully nationalized, if not fully nationalized. So when all these innovative loans the GSEs have (0% down, gifts acceptable, etc) blow up, the GSEs will draw money from the Treasury and the Fed will buy that treasury debt by money printing/balance sheet expansion, which is a covert extraction of that purchasing power from society, i.e. covert taxation.
With a central bank, who needs taxes?
It’s like getting caught for grand theft, and instead of facing a conviction for grand theft and some hard time in prison, the law is changed so that what you did is no longer grand theft, and the judge apologizes and asks you if there’s anything he can do to help you get over this most unfortunate inconvenience, so you tell him that he needs to outlaw locks on doors to make it easier to take these things that are not yours, and he does.
Liberalism and relativism make that kind of thing happen.
I am suddenly reminded of Bill in LA, who was an open borders advocate. I dared him on more than one occasion to leave the door of his personal domicile wide open for one month - whether he was home or not.
Let anyone come in who wanted to come in, whenever they want to, borrow his possessions, steal his money, access his computer. Additionally, hold him up at gunpoint, let in any and all family members to sleep in his bed, use his shower, etc.
He didn’t take me up on the offer. He wimped out.
Still and throughout, he had no issue with that happening to someone else, or to communities and cities across the country. Open borders all the way, baby!
To summarize: Another example of “privatize the gains, socialize the risks” phenomenon. But this time on a very personal level.
“I am suddenly reminded of Bill in LA, who was an open borders advocate. I dared him on more than one occasion to leave the door of his personal domicile wide open for one month - whether he was home or not.”
That’s a bad analogy. Nobody is actually for ‘open borders’ — that is just a political slogan.
And there you go again, trying to steer the discussion away from economics towards your personal political agenda.
“And there you go again, trying to steer the discussion away from economics towards your personal political agenda.”
You’re right. My political agenda is Liberty for all Individuals. And it always will be. And you’ll continue to hear about it, up and until the time comes that Ben bans me, the HBB is discontinued, or I leave on my own accord.
That pursuit includes theory, ethics, law, economics, housing, behavior, language, education, discussion.
Anything and everything. All rooted in Individual Liberty.
All with the understanding that the Individual will always be the ultimate minority.
A minority that needs protection from both the masses AND from groups of people that arbitrarily claim membership in something or in some group that enables them to assume control of something that is not theirs, or to take something that is not theirs.
And I will continue to fight on for as long as it takes.
How about you? What is your agenda?
To be disingenuous? To change horses in midstream as to suit your goal of the moment? To hide behind whatever third party information you can muster up and post om this site rather than clearly state what you believe to be true?
That is how I perceive you based on your behavior here.
Rant on.
The big picture question is, how do you load more debt on individuals and guarantee the cashflow to lenders?
This is the core of “Financial Innovation.”
We had a full weekend topic on it years ago, but can’t find it currently. Informative I thought.
Realtors are liars.
….. and every appraisal apocryphal.
I wanted to hit on this from yesterday. I don’t consider this real estate, but a certain frothing mouth has strong opinions that it is. This is a mobile home park where you buy a share of the corporation to live in your mobile. They are not deeded lots, so you don’t own the dirt underneath you. I consider this no different than a camping membership at a private campground.
“Pismo Beach Mobile Home Park is a 29 acre gated senior community with 233 home sites located on the Pacific Coast Highway….The park is resident owned. New residents are required to own a share in the Corporation.”
http://pbmhp.com/about-us/
You’d be right.
Does that certain frothing mouth have a vested interest?
As Ben alludes to every once in a while, we do have our own nefarious individuals right here on the HBB.
Sometimes I have a hard time letting go of the drama.
It occurred to me that a lifetime of living dishonestly can really make a person cranky. Quite a few of those here know more in their little finger about living honestly (free of speculative debt) than some old cranks have ever forgotten about whatever.
where you buy a share of the corporation to live in your mobile. They are not deeded lots ??
LOL…Nice try with the backpedal….
So, Mr. BSD, who owns the land that is beneath your condominium ??
Or is that also, like you say, a camping membership and not real estate ownership…
There you are, frothy. I didn’t backpedal at all. I said the exact same thing as yesterday - THIS IS NOT REAL ESTATE. Where’s the deed?
Sometimes I have a hard time letting go of the drama.
I find it fascination that somebody considers a membership in a camping club or a share of a corporation “real estate.” It’s laughable, to me.
*fascinating
Grrrrr - spell check.
or a share of a corporation “real estate.” It’s laughable to me ?
Oh boy. I will just let that one sit out there for everyone with a ounce of real estate knowledge to digest. Okay Blue. Come to the defense.
Davey baby,
I remember, some time ago now, you once said right here on this very board that you voted Republican prior to 2000.
Seems the regression is nearly complete.
Need to worry. I’ll have your pond all ready and full of algae for you within the year.
You didn’t enlighten us, frothy, you’re just, well, frothing again.
to the pit of misery!
It’s a co-op. Then along comes a bid for the acreage and a vote is taken to sell or to hold. Welcome to the New York merry-go-around.
Most young people aspire to buy their first home. I spent a decade trying to get rid of mine.”
In the early 80’s I heard about people from Houston who moved for a new job and had the same issue.
I sat next to a gentleman on a plane one time who was from Concorde, NH. He said that it was impossible to sell a house there, that his neighborhood was over 50% empty and people just abandoned the idea of selling their houses and moved somewhere else. This was in the 90’s.
During the SoCal mid nineties crash, I knew people who surrendered the house when they had to move away for a new job. They did make sure to buy the new house wherever they were going before mailing in the keys to the old house.
We bought at the tail end of that. Our new neighbors hinted that we had made a huge financial mistake.
“Our new neighbors hinted that we had made a huge financial mistake.”
Was this the East Bay place?
Yes. At something like $90/sq ft. Good luck finding that price anywhere in CA today!
We may be enterting a historically parlous period to own a retirement income fund consisting of a conservative balance of stocks and bonds.
Financial Times
US Economy
US stocks suffer biggest daily loss of Trump era
S&P down more than 2% and bond yields surge on concerns about inflation
Nicole Bullock and Eric Platt in New York yesterday
US stock markets suffered their biggest loss of the Trump presidency on Friday, following bonds lower after a rise in wages intensified fears of inflation.
The sell-off in stocks followed weeks of turbulence in the Treasury market as economic growth across the world has accelerated, solidifying the view that central bank policymakers can finally withdraw crisis-era stimulus.
The capitulation by equity investors this week follows a rise in the yield on the 10-year Treasury to a four-year high, with the benchmark note approaching 3 per cent, a level last seen in 2014.
The S&P 500 dropped 2.1 per cent to 2,762 while the Dow Jones Industrial Average declined 666 points, or 2.5 per cent, to 25,521. The technology-heavy Nasdaq Composite slid 2 per cent to 7,241.
“This is all about interest rates,” said Jurrien Timmer, director of global macro at Fidelity Investments. “It is about the stock market finally paying attention to the bond market.”
…
just for grins I ran a Constant Loans size, at diff. rates to determine a payment. Then I ran a constant payment at diff. rates to get median loan size for that payment. (see below)
Constant Loan Size
Jan.1 2018 Feb 2nd Rate 6/18(?) Rate 3/19(?)
30 year rate 4% 4.50% 5% 5.50%
Median House Price 275000 275000 275000 275000
Monthly Payment ($1,313) ($1,393) ($1,476) ($1,561)
Constant Payment
Jan1 2018 Feb 2nd Rate 6/18(?) Rate 3/19(?)
30 year rate 4% 4.50% 5% 5.50%
Median House Price $275,000 $259,114 $244,568 $231,229
Monthly Payment ($1,313) ($1,313) ($1,313) ($1,313)
% decrease in Median HP -6% -11% -16%
Take homes:
1) As interest rates normalize, the same income distribution and lending standards will support smaller and smaller home purchase prices, driving a stake through the heart of Housing Bubble 2.0.
2) Lenders may be able to forestall the effect for a short period by reintroducing subprime lending, in order to suck in buyers at price points where they would not otherwise qualify. But this will only serve to plant the seeds of another financial collapse.
It seems like the Trump Fed is in the best position of any since at least 1996 to restore affordability to America’s housing market, and they can do so simply by following through on plans announced years ago to end extraordinary accommodation. Since the executive and legislative branches of government will have no role in this process, there is no political risk.
This seems like a Goldilocks opportunity to finally deliver on the long-sought, ever-elusuve goal of providing affordable housing to all Americans.
we are at the end of a credit cycle of trump wants to take this thing even further. trump is a debt meistro.
“trump wants to take this thing even further.”
Well if that is the case, hopefully the independent Fed chair has learned many lessons from other independent government officials who acted independently against Trump’s wishes.
Yeah, it was actually kind of heartening that federal regulators shot down Rick Perry’s attempt to prop up struggling coal and nuclear plants which have been losing due to more economical renewable energy:
https://www.nytimes.com/2018/01/08/climate/trump-coal-nuclear.html
Regulation isn’t what’s killing “beautiful clean coal,” cheap natural gas is what’s putting the nail in the coffin.
I don’t know what you learned from that, but I can see that if you were to do what you’re considering you’ll pay more than half a million more that me for housing over the next 30 years.
Payments are for DebtDonkeys.
Parents can take out a HELOC to fund their kids house buying efforts. A clever innovation - but it requires both parents and kids to be house-crazy
Millennials’ New Weapon in Bidding Wars: A Parent’s Home Equity
By Leigh Kamping-Carder
Wall Street Journal
Updated Oct. 13, 2017
“Parents refinance their own homes to help their children compete as all-cash buyers in hot housing markets. When the purchase closes, the children pay the parents back.”
Call it the mortgage merry-go-round: Parents refinance their home to fund the full cost of their son or daughter’s desired home. This allows the child to compete as a desirable all-cash buyer in an area where bidding wars are common. Then, when the purchase closes, the child refinances the new home and pays the parents back.
Sellers often prefer cash because transactions can close quickly without making a deal contingent on financing. This is particularly important in bidding wars: If the purchase price is above the list price and appraised value, it may be tricky to get a loan, said Kas Divband, a Washington, D.C., agent with Redfin. Mr. Divband said he has worked on six deals where the buyer was relying on a parent’s mortgage to make an all-cash offer.
https://www.wsj.com/articles/millennialss-new-weapon-in-bidding-wars-a-parents-home-equity-1507645135
To anyone reading what Neuromance just posted, you might want to listen/watch this recent speech by Trey Gowdy.
Few of us here are slow-witted enough to succumb to what these parents are doing - refinancing their homes to help kids purchase outrageously priced homes in the midst of a mania. We tend to think of such behavior as it relates to finances and money.
Fair enough.
But how about ethics and morals? Are you bothered by these parents’ lack of ethics and morals? What parent would do this to their kids and to their communities? What kind of adult (any adult) would do it?
There are more important things in life. Such as making a difference.
*****
Ignore the unfortunate title of this speech. All of it is worth seeing and listening to. If you are short on time, I would recommend starting at 20:00 and watching until the end.
Thanks.
https://www.youtube.com/watch?v=GixphQfbBUc
I hadn’t heard that this girl passed.
Thanks for sharing your voice and may you rest in peace.
https://www.youtube.com/watch?v=Yam5uK6e-bQ
Cranberries singer Dolores O’Riordan dies suddenly aged 46
16 January 2018
The Cranberries lead singer Dolores O’Riordan has died suddenly at the age of 46, her publicist has confirmed.
The Irish musician, originally from Limerick, led the band to international success in the 90s with singles including Linger and Zombie.
A statement from her publicist said: “The lead singer with the Irish band The Cranberries was in London for a short recording session.
“No further details are available at this time.”
A Metropolitan Police spokesperson said the police were called to a hotel in Park Lane at 09:05 GMT on Monday, where “a woman in her mid-40s” was pronounced dead at the scene.
The police have confirmed that the death is not being treated as suspicious and said a report was being compiled for the coroner.
http://www.bbc.com/news/entertainment-arts-42696376
Live hard and die young
Keller, TX Housing Prices Crater 11% YOY As Builders Slash Prices
https://www.movoto.com/keller-tx/market-trends/
This Dude Rocks.
https://www.youtube.com/watch?v=SMyHdVvjd4o
how many margin calls came you were yesterday?
You still hearing those voices azdude?
https://www.youtube.com/watch?v=X6qzfJ1EG88
“That said, we are certainly suffering from serious affordability issues, but this is not translating into defaults on loans.”
Wait until the affordability issue gets solved.
More than fifty years ago(1966):
https://www.youtube.com/watch?v=NPDGjzhGutU
I’ll be damned
Everybody’s Talkin’ 19:52
Never heard of Fred Neil but I will be listening to more of him now.
Thanks
“Toward the end of 2011, the Journal moved me to New York to write about Wall Street financiers.”
Of course they did.
Hey Jonesy…. What’s the Rage Cage vacancy rate these days?
Oscar Peterson - Hymn To Freedom
Live in Denmark,1964. Oscar Peterson on Piano Ray Brown on Bass Ed Thigpen on Drums
https://www.youtube.com/watch?v=tCrrZ1NnCuM
Excellent.
Not hip on the first 2:06 until the second time through.
Underscoring that Fed monetary policies don’t generate wealth, they redistribute it.
In a 2013 study McKinsey found that in the US between 2007 and 2012, lower interest rates resulted in a net transfer from households, pension funds, insurers and foreign investors to the government, non-financial business and banks of around US$1.36 trillion. The benefit to US banks was around $150 billion from an increase in effective net interest margins and a cumulative increase in net interest income.
http://www.independent.co.uk/voices/banks-still-haven-t-learnt-their-lessons-from-the-financial-crash-a7625311.html
“The benefit to US banks was around $150 billion from an increase in effective net interest margins and a cumulative increase in net interest income.”
For the sake of children everywhere more effort must be applied to strengthening such humanitaran policies.
R U gonna get some popcorn for BlACk MonDay?
“R U gonna get some popcorn for BlACk MonDay?”
It’s not that I don’t appreciate how you cover up your bad grammar and spelling but I have found that people on this blog are pretty lenient as long as you’re not trying to act smarter than you actually are.
Totally agree. Strong and prosperous banks allow the “um” sylible to be extracted from the word “umpossible” and thus strengthens the flow of money from those who have none to those who have an abundant supply. God’s Plan.
For it is written:
“For to everyone who has, more shall be given, and he will have an abundance; but from the one who does not have, even what he does have shall be taken away.
Matthew 25:29.
Sylible = syllable
Anyone still living under the illusion that BitConnect’s primary purpose is to provide an alternative medium of exchange has his head buried in the sand.
Forbes dot com
Trending Now
Investing #MarketMoves
Feb 2, 2018 @ 11:34 AM
Here’s One Reason Why Bitcoin Is In Freefall
Kenneth Rapoza, Contributor
Traders work in a trading pit at the Chicago Board Options Exchange. Trading in bitcoin futures began in December. The most active bitcoin future is struggling to keep up with the spot price. Bitcoin is now around $7,500. The XBT/G8 was priced at $8,390 on Thursday. (AP Photo/Kiichiro Sato)
The market cap of the world’s top cryptocurrencies has fallen from around $620 billion to $379.3 billion in less than two months. Most of it is due to Bitcoin, the market leader. Bitcoin may be in a freefall because demand for the cryptocurrency as a usable form of payment is slipping, if not dying altogether.
At least four companies have given up on Bitcoin transactions.
Stripe said it will stop all Bitcoin transactions by April 23. Microsoft is reportedly no longer accepting it as a means of payment. Steam, a software developer geared toward gamer technologies, stopped accepting Bitcoin in December citing transaction costs.
Transaction speed is another issue. Bitcoin processes under 10 transactions per second. By comparison, Amazon processes hundreds of transactions per second using a good old-fashion credit card.
“The network is currently overloaded due to arbitrage (among Asian Bitcoin traders) and the rush to trade Bitcoin,” says Ruslan Tugushev, CEO of Storiqa, a blockchain company for e-commerce with its own token, STQ. “The blockchain gets overheated like a frying pan when Bitcoin is used for payment purposes too instead of as a digital commodity. I think faster transaction speeds will require higher commissions for (Bitcoin) miners,” he says of the companies and individuals that own the computer equipment used to process Bitcoin transactions.
Gig-economy platform provider Fiverr no longer accepts Bitcoin.
And in an odd twist, the North American Bitcoin Conference stopped accepting Bitcoin payments for tickets due to transaction fees and slow processing times for payment, Business Insider reported on Jan. 10.
Mountain View, CA Housing Prices Crater 8% YOY As Crime And Poverty Ravages State
https://www.movoto.com/mountain-view-ca/market-trends/
Denver, CO Housing Prices Crater 10% YOY On Expanding Mortgage Defaults
https://www.zillow.com/denver-co-80211/home-values/