The Housing Bubble

Foreclosure fighters on their way back

Photo
Rep. Frank drops in at West Palm Beach’s mortgage loan ‘Save A Thon’

By Kimberly Miller
Palm Beach Post Staff Writer
Posted: 8:05 p.m. Tuesday, March 30, 2010

The Neighborhood Assistance Corporation of America is heading back to South Florida after drawing more than 24,000 desperate homeowners to a February mortgage-modification marathon in West Palm Beach.

The nonprofit group, which offers free counseling and face-to-face contact with lender representatives, will be in Miami Beach for five days beginning April 15.

As with the Save the Dream event at the Palm Beach County Convention Center, the program at the Miami Beach Convention Center will run 24 hours a day. It will be NACA’s 14th event around the country.

“We saw the demand is there,” said NACA spokesman Darren Duarte about South Florida. “We had people at the end of the West Palm Beach event who didn’t get to meet with a counselor and that tells us there is a need.”

The group receives government grants for its work, but also earns up to $500 from lenders for successful modifications that result in at least three on-time mortgage payments.

Most successful modifications include a lower interest rate or principal forbearance. New programs recently announced by Bank of America and the federal government also offer principal forgiveness in some cases.

During the five days, counselors worked with people on about 24,330 loans, and completed 7,547 same-day payment reductions.

Homeowners are encouraged to register for the event at http://www.NACA.com.

Flipping has become a part of the financial way of life to millions of people world wide. It does help that the gubmint is willing to promote and back stop the flippers dreams.

House Flippers in U.S. Crowd Courthouse Steps in Hunt for Deals.

March 31 (Bloomberg) — During the U.S. housing boom, even amateur investors could buy and sell a property within a couple of months and turn a profit. Today there’s nothing amateur about house flipping.

Homes with punctured walls and missing appliances draw multiple offers from professional investors at auctions in foreclosure-ridden states such as Arizona, California, Florida and Nevada. Competition is so stiff that experienced flippers such as Sergio Rodriguez and Brian Bogenn look back with nostalgia at last year, when they turned over 48 residences in the Phoenix area.

“A year ago, bums outnumbered bidders at the courthouse steps,” where many foreclosure auctions take place, Rodriguez said. “Now the bums are way outnumbered.”

In Phoenix, 4,661 foreclosed homes changed hands within six months of being purchased in 2009, an increase of 81 percent from the year earlier, according to RealtyTrac Inc., which sells foreclosure data. Flips in the California counties of Riverside and San Bernardino rose 45 percent to 17,203. In Las Vegas, which has the highest foreclosure rate in the country, they climbed 38 percent to 8,042.

Nationally, flipped homes gained 19 percent to 197,784 in 2009. Final figures may rise because some homes bought in the fourth quarter may get flipped this year, said Daren Blomquist, a spokesman at Irvine, California-based RealtyTrac.

FHA Waiver

Sales could get a lift from the Federal Housing Authority’s one-year waiver of anti-flipping rules that took effect Feb. 1, allowing FHA borrowers to acquire foreclosed homes from owners who have held title for less than 90 days.

Housing Prices May Be Heading for a Double Dip. ~ CNBC

Anyone thinking housing prices have reached a bottom had better do some recalculating. Despite Tuesday’s Case Schiller report showing smaller declines in January, housing prices may already be in another free fall.

Newly revised numbers are pointing to the decline.

The Federal Housing Finance Agency’s (FHFA) adjusted figures show a housing price decline of 2 percent in December and 0.6 percent decline in January—reversing some regional price increases in 2009.

And more pricing dips are predicted.

“Case Schiller aside, we expect housing prices to fall another five percent in the coming months,” says Paul Dales, US economist at Toronto based Capital Economics. “We’ve actually seen some declines in areas of the country. That’s going to put a halt on any housing recovery.”

Dales argues that the end of the $8,000 first time buyers tax credit on April 30th and the large amount of foreclosures in the pipeline—or on their way there—are reasons why prices will continue to fall.

“There’s going to be less demand for housing when the tax credit ends,” Dales says.

This move is bound to annoy the anti-big oil folks. Drill baby, drill…

Obama to Announce Expanded Offshore Oil Drilling Plan (Update2)

March 31 (Bloomberg) — U.S. President Barack Obama will today announce proposals to allow oil and natural-gas drilling off U.S. coastlines in the Atlantic Ocean and Gulf of Mexico when he delivers a speech on energy security.

Obama will propose allowing exploration off the coast of Virginia and, if a Congressional moratorium is lifted, in the Gulf of Mexico 125 miles (201 kilometers) off the coast of Florida, according to an administration official speaking on the condition of anonymity.

The new policies are designed to reduce the nation’s dependence on foreign oil and create jobs while taking environmental risks into account, the official said.

“It’s absolutely a big change in policy because these areas have been closed for years,” said Stuart Traver, principal adviser at consultant Gaffney, Cline & Associates Ltd. in Singapore. “While it’s interesting, we’re really talking probably years before we see an impact in terms of new production.”

Well, you can kiss all that beachfront property good-bye. Not to mention fishing, that’ll be killed off too. Say, I thought there were going to be “green” energy sources.

http://www.nytimes.com/2010/03/31/science/earth/31energy.html

Why the “about face”? It has nothing to do with energy independence. The amount of oil that will be found will have minimal benefit compared to the damage that will be done. So, why? Look at the states targeted. It’s payback time, time to turn those red states brown with oil residue and nasty tar washing up on the beaches. Not to mention oil rigs washing up on shore, because that there’s hurricane alley.

A report from Boston

“About 20,000 people sign up for food stamps every day, and college students across the country are the newest demographic being encouraged to enlist.

“Portland State University devotes a page on its Web site to explaining the ease with which students can receive benefits, along with instructions on how to apply. The school says food stamps are not charity but rather a benefit all honest taxpaying citizens can afford.”

“…the current rebound in the economy is a statistical mirage,” writes David Rosenberg. It is “orchestrated by record amounts of monetary and fiscal stimulus that are simply unsustainable and actually risk precipitating a very unstable financial and economic backdrop in coming years.”

The NY Times on foreclosures — the problem of strategic default needs to be addressed by writing down principal, the columnast says.

http://economix.blogs.nytimes.com/2010/03/31/strategic-defaults-lessons-from-the-great-depression/?hp#preview

“The home foreclosure process begins when a homeowner stops making his mortgage payments, so the major policy question is how to get homeowners to pay.”

Should that be the major policy question? What is the goal here?

“One school of thought is that mortgage payments are too high to be ‘affordable,’ and if the government could arrange for payments that were a more reasonable fraction of the borrower’s income, homeowners would make their payments and keep their homes. As I explained last week, this idea is the cornerstone of federal mortgage modification programs, under both the Bush and the Obama administrations.”

“The other school of thought is that ‘affordability’ cannot be so rigidly defined, and that the vast majority of homeowners — even many of the unemployed — would make their mortgage payments if they had enough incentives to do so. In this view, most foreclosures are cases of ’strategic default.’”

There seems to be a consensus emerging that the only problem with slavery in the U.S. is that it was racially discriminatory.

Indian outsourcers eye bonanza from US healthcare bill

NEW DELHI (AFP) – Indian outsourcing firms are banking on a business bonanza from US President Barack Obama’s landmark healthcare reform as cost pressures prod insurers and hospitals to become more efficient.

“The influx of newly insured represents a big, exciting opportunity for the industry,” Ananda Mukerji, chief executive officer of Firstsource Solutions, which was an early outsourcing mover in the US healthcare market, told AFP.

“These 32 million Americans represent a considerable rise in consumption of healthcare services and the legislation is especially significant with its new limits on how much can be spent on administrative costs,” he told AFP.

–found at yahoo news

Ah the good ol’ government and people who trust it

Creative Ways Of Hiding Debt

* New Hampshire took $110 million from a medical malpractice insurance pool to “balance its budget”. The State Supreme Court said put it back.
* Colorado tried to grab a $500 million surplus from Pinnacol Assurance, a state workers’ compensation insurer that was privatized in 2002.
* Hawaii went to a four-day school week.
* Connecticut tried to issue its own accounting rules.
* California is making companies pay 70 percent of their 2010 taxes by June 15.
* New Jersey and other states make their budgets look balanced by pushing debts into the future. While Greece used a type of foreign-exchange trade to hide debt, the derivatives popular with states and cities have been interest-rate swaps, contracts to hedge against changing rates.

Combo:

Credit is Dead. Long Live Cash!

Why the return of a cash economy is good for consumers and businesses alike.
By Daniel Gross | NEWSWEEK
Published Mar 24, 2010
From the magazine issue dated Apr 5, 2010

Cheap and plentiful credit has powered the U.S. economy for decades. But since the financial crisis of 2008, America has gone on a drastic debt diet. Just as families are paying down credit-card debt and building up cash reserves, businesses large and small are learning to operate in an environment where cash once again is king.
…

…More redneck terror…

NASHVILLE, Tenn.— A 70-year-old Nashville man was accused of ramming his sport utility vehicle several times into the back of a vehicle that had a Obama/Biden bumper sticker. Harry K. Weisiger, a retiree, made obscene gestures and pointed at the campaign sticker for President Barack Obama and running mate Joe Biden before he smashed into schoolteacher Mark Duren’s car, police said. Weisiger has been charged with reckless endangerment, leaving the scene of the accident and refusing to take a field sobriety test.

The incident appears to be among the overheated partisan political atmosphere, including death threats sent to members of Congress and their families who supported health care reform.

Duren had picked up his 10-year-old daughter from school Thursday when he stopped near the Belmont University campus. An SUV pulled up behind his Toyota Camry and the driver began honking and gesturing angrily toward the bumper sticker, The Tennessean reported.

“I raised my hands palms up and shrugged. He then eased up behind my car so I could only see the grille of his SUV and blew his car horn, nonstop,” Duren told the newspaper.

As Duren drove home, the SUV’s driver continued making gestures and pointing at the sticker, according to a police report.

The driver, identified by Nashville police as Weisiger, accelerated and crashed into the bumper, directly over the sticker.

Duren tried to calm his frightened daughter as he stopped and Weisiger rammed it again, trying to push it off the road, police said. After a few more pushes, the SUV sped away and Duren called 911.

A neighbor followed the SUV to a grocery store, where police said they found Weisiger trying to pop a breath mint and insisting that he had “not much” to drink.

Weisiger’s acquaintances described him as a responsible businessman and a father of four with no history of violent behavior.

“He was just a loyal employee, with no previous incidents of any sort like the one being described,” said Patrick Parker, spokesman for Hardaway Construction Corp., where Weisiger worked for 25 years before retiring in 2008. “You never know, I guess.”

…How many more times must we hear about such tragedies before the Government does the right thing and confiscates all guns?

RE: People hesitating to buy due to worries about withdrawal of government support

3) If the government actually does follow through on announced plans to phase out housing price support programs, there is likely to be an extra downside impact, due to the expectations shock over actions that actually follow their announcement.

* March 30, 2010, 3:51 PM ET

Fed’s Housing Exit Leaves 50/50 Chance of a Dip

By Tiernan Ray

The Federal Reserve Board is set to end its purchase of mortgage-backed securities tomorrow, at a time when the experts are not sure if the housing market’s rebound can sustain itself.

The Fed’s exit is expected to push up mortgage rates, which could weaken demand from buyers.

Following a surprisingly strong report on home prices in January, according to the S&P Case-Shiller Home Price Index, this morning, the index’s co-creator, Robert Shiller was on Bloomberg television today to discuss the risks still weighing on the market.

“We had a real sharp recovery starting a year ago, and it’s still going up on a seasonally adjusted basis, but it’s gotten weaker,” said Shiller.

“… [the outlook is] kinda iffy right now. The big cloud on the horizon is the withdrawal of government support for the housing market. I think people are in many places getting worried about that, and so they’re hesitating to buy.”
…

America in the Red (with graphs showing the course of our debt)

“By 2020, the United States would owe more than $20 trillion (IMO this is a low ball figure), the equivalent of about 85% of GDP. At that point, interest payments alone would consume about $900 billion a year — almost five times as much as they did in 2009.”

THE ROAD TO DEFICIT REDUCTION
1) Set firm budget goals

2) To put the budget on sound footing, they will need to combine proposals to cut spending, increase revenues, and, where possible, boost growth

3) Any eventual solution must put spending cuts front and center.

4) Policymakers should recognize that different spending challenges require different approaches

5) Policymakers must understand that while some tax increases will almost certainly be required, not all taxes are created equal — and that which form the tax hikes take will make a big difference to our future prosperity. Taxes on income, for example, are usually worse for the economy than taxes on consumption.

6) Finally, our leaders should obey the first law of holes: When you are in one, stop digging. Unfortunately, the current climate in Washington encourages the exact opposite: Dig as fast as you can while there’s still time.

http://nationalaffairs.com/publications/detail/america-in-the-red

I know, another freakin article about debt. Where are we going to find the leaders that will do these things? The Dems? The Repubs? Independents?This current trend cannot be sustained and I’m willing to support any that truly want to do something about it but IMO there is no incentive for any to do this.

Let me present first rule of incentives, WIIFM, as in Whats In It For Me? So if we tie the political elite’s retimements and benefits to our fiscal condition, then they will have the incentive to balance our budget.

Peace
Lip

Best advice today
Avoid buying house too soon
Prices will fall more

Housing Prices May Be Heading for a Double Dip
http://www.cnbc.com/id/36098637
(If duplicate, sorry.)

Job Seeking and the Gray-Haired Plump Group:

The Ugly Truth If You’re Old or Fat and Looking For Work -

First, let me tell you how health insurance actually works from the employer perspective, because most people simply don’t understand this.

You probably have a line on your pay stub that says something like “Health Insurance: $100″ or similar. You think that’s what it costs on your “group plan.”

You’re wrong.

The rules for deductibility of insurance expenses provided to employees are relatively simple but have profound implications. Specifically:

•Employers cannot charge differential deductions. That is, if I am going to hit your check for $50, I must hit everyone’s check for $50.

•The majority of the actual expense for any particular person must exceed half of the total for the premiums to be deductible.
But in point of fact employees are individually rated. That is, a 20 year old male with no medical problems - that is, in excellent health - might cost $200 a month in premiums. The same policy with the same coverage for a morbidly obese 60 year old woman on multiple medications for chronic conditions might cost $1,000 - or more.

The law says I cannot deduct more than $100 a month or I can’t write off the cost of the insurance against gross income (that is, I can’t take the expense pre-tax.) The law also says I can’t discriminate. Therefore, if I want to deduct the premium expenses (in total) pretax I cannot deduct more than $100 monthly for “health insurance.”

Now consider the 20 year old kid. He costs me, the employer, $100 for health benefits (he pays the other half.) But the obese woman costs me $900 - nine times as much!

The law says that I cannot ask you certain questions when you come in for an interview. For instance, I cannot ask if you have dependents, I cannot ask about your intention to have children (if you’re a woman) and a whole host of other topics. It is explicitly unlawful for me to make such inquiries, as they evidence potential for me to engage in illegal discrimination in hiring.

But if you think this sort of decision-making doesn’t go on - when the impact is over $8,000 per year between two employees in cost to the employer - you’re nuts. It most certainly does.

(From K. Denninger)

Somewhat relevant story, because we’ve talked about abandoned boats and other property here:

http://www.nbcmiami.com/news/local-beat/Florida-Man-Gets-Googled-and-Arrested-89545317.html

Someone spotted a boat that had been dumped/abandoned. Using google earth they were able to spot the boat in its original position at someone’s house nearby….

Bubble-era housing developments crowd out San Diego balloonists:

Balloonists’ sinking feeling
Landing, environmental issues spur crackdown by San Diego

By Mike Lee, UNION-TRIBUNE STAFF WRITER

Tuesday, March 30, 2010 at 9:26 p.m.

The city of San Diego accuses balloonists of trespassing, environmental damage and parking in undesignated areas.

Sean M. Haffey / Union-Tribune

Hot-air balloon operators typically launch in Encinitas, Solana Beach and northern San Diego and land in the Carmel Valley or the Black Mountain area.

Hot-air balloons have drifted over Carmel Valley for more than three decades, giving tourists and locals sunset rides few can forget.

But the image of balloons silhouetted against the multihued sky may fade into the past as San Diego city officials clamp down on operators who allegedly violate land-use rules in the Black Mountain area. The City Attorney’s Office said problems include trespassing, environmental damage, doing business without a permit and parking in undesignated areas.

The demise of the region’s ballooning industry has been predicted for at least a decade, as increasing development in North County reduced the area for safe landings. The current conflict threatens to force out the handful of companies that operate balloons and flocks of visitors from around the world who enjoy the evening breezes aloft.

“It’s driving them away,” said Robert Griscom, an aviation attorney representing a balloonist charged with misdemeanor trespassing by San Diego. “I guess that’s what the city wants.”
…

Yesterday evening, I attended a lecture by Dallas fed president Richard Fisher. It was before a standing room only crowd at the University of Arizona business school. Key points:

1. There’s no immediate plan to raise interest rates. And Fisher pointed out his reputation as a strong dissenter against the cuts that have gotten us down to a ZIRP. But, his hawkish perspective notwithstanding, he doesn’t think that the time is right for raising rates.

2. All those junky MBS that the Fed bought? Well, there’s no timetable on selling that stuff. He hinted that there is a market for it, but, as I mumbled to the acquaintance sitting next to me, “Who’s gonna buy it?” I don’t see the circling buzzards that would be interested in it, but maybe I don’t have a strong enough pair of binoculars.

3. In response to a local community banker’s concerns about the developing CRE meltdown, he seemed a bit too calm. I couldn’t help thinking that he was calm like a duck, which you see moving placidly along the surface of a pond. What you don’t see is the duck’s feet, paddling furiously. He pointed out that the community banks were heavily involved in strip shopping center lending, rather than big office towers. Well, guess what, folks, here in AZ, there are a lot of newly built strips that are waiting for the retailing equivalent of Godot.

4. Since the crowd was overwhelmingly UA business students, he recommended JK Galbraith’s book, A Short History of Financial Euphoria, as a way of understanding what we’re experiencing now. He also encouraged the students to study the history of the Long Depression.

Life in sinking Central Arizona:

Town employees told to sacrifice work hours to reduce government budget.

Taxation without representation: Town sewer authority taxes residents w/o providing service.

More main street shops closing, while:

Town council dithers over what kind of merchant signage is permissible.

Gas stations, alcohol sales, and reservation run smoke shops sole benefactors in the downturn.

Pedophilia, dope dealing, spousal abuse, and law enforcement/adjudication are the area growth industries. More often than not the vices of the law breakers and the law defenders are similar, but cops charged when caught DUI? Ain’t gonna happen unless they hurt someone.

What does the Fed have in store to stabilize mortgage rates after they stop buying MBS?

I trust the Fed will devise another way to intravenously pump liquidity into the mortgage market when they stop purchasing MBS.

How Will the Fed’s MBS Exit Affect Mortgage Rates?

Mar 31 2010, 10:57 AM ET

Today marks the end of the Federal Reserve’s $1.25 trillion mortgage security shopping spree. There has been a broad spectrum of opinion on what this means for mortgage rates, and ultimately, the mortgage market. Which argument is more compelling?

Mortgage Rates Will Rise

Late last year, the predominant view was that mortgage rates would increase significantly once the Fed removed its support of mortgage bonds. I explained why in posts from November and December. The general idea is this: if there’s no one to pick up the slack on buying mortgage securities once the Fed stops, then banks won’t have as easy a time obtaining funding for originating more mortgages. That would drive up mortgage interest rates, since they would probably have to rely on investors, who are still wary about mortgage-backed securities (MBS) after getting burned during the housing boom and will demand a lofty premium for the perceived risk and uncertainty.

So if the private market can’t step in to make up the Fed’s buying, then mortgage interest rates should rise. If the Fed decides to begin selling some of the mortgage securities it purchased during its buying binge, that could make matters worse. More than $1 trillion in MBS could flood market supply, making new issuance more difficult.

Mortgage Rates Will Be Unaffected
…

The smaller-than-expected U.S. stock market selloff rides the back of a dollar selloff on the FOREX market. From Bloomberg:

World Currencies

CURRENCY VALUE CHANGE % CHANGE TIME
EUR-USD 1.3536 0.0122 0.9077% 12:09
GBP-USD 1.5196 0.0126 0.8394% 12:09
USD-CHF 1.0522 -0.0144 -1.3458% 12:08
USD-SEK 7.1983 -0.0737 -1.0130% 12:08
USD-DKK 5.4991 -0.0517 -0.9314% 12:08
USD-NOK 5.9377 -0.0533 -0.8901% 12:08
USD-CZK 18.7750 -0.2005 -1.0566% 12:09
USD-SKK 22.2510 -0.2096 -0.9332% 12:08
USD-PLN 2.8520 -0.0350 -1.2140% 12:09
USD-HUF 196.1330 -2.7225 -1.3691% 12:09
USD-RUB 29.4170 -0.0900 -0.3050% 12:08
USD-TRY 1.5185 -0.0116 -0.7565% 12:08
USD-ILS 3.6920 -0.0190 -0.5120% 12:08

‘Luxury Is Not Dead’ as Greubel Sells for $490,000 (Update1)

March 31 (Bloomberg) — Samantha von Sperling realized luxury shoppers had regained some of their confidence last month when her clients began booking $16,000 weekend excursions to Manhattan that included Jean Georges dinners and shopping sprees at Barneys and Giorgio Armani.

Von Sperling’s company, Polished Social Image Consultants, charges $3,000 a day for services from personal shopping to advice on dining etiquette. While the uptick is welcome, she said, it can’t compare with pre-recession days, when clients dropped as much as $100,000 in 48 hours.

“It’s still not bling-bling,” said Von Sperling, 38. “It’s a little more subdued. The budgets aren’t as big, yet.”

With the Standard & Poor’s 500 Index up 73 percent from last year’s low and Wall Street bonuses rising in tandem, the big spenders who vanished during the recession have returned to Rolls-Royce dealerships, high-end antique dealers and Madison Avenue boutiques. They are ready to spend, if a little chastened, shop owners and analysts say.

Tiffany, Nordstrom, Bergdorf

“As we get into the spring, things seem to be loosening up a lot,” said Benjamin Macklowe, vice president of Macklowe Gallery, a Madison Avenue outfit that sells French art nouveau furniture and Tiffany lamps that can cost up to $3.5 million. “There’s just a lot of pent-up demand amongst the well-to-do to have beautiful things.”

The return of well-heeled shoppers is lifting the fortunes of luxury retailers and manufacturers. In February, sales at stores open at least a year rose 10 percent at Seattle-based Nordstrom Inc., which offers a Be & D leather purse for $1,190. Revenue at New York-based jewelry chain Tiffany & Co., whose Lucida three-carat diamond ring sells for $169,500, surged 17 percent in the quarter ended Jan. 31. Bergdorf Goodman’s two New York stores, owned by Dallas-based Neiman Marcus Group Inc., posted a 9 percent sales gain for the same three months and sell Manolo Blahnik calfskin sandals for $765.

“For the most part, people feel we have turned the corner,” said John Long, partner at Kurt Salmon Associates, a New York retail consulting firm. “People have been wearing the same thing for a year or more. They want something new.”

In Greenwich, Connecticut, home of many Wall Street executives, luxury retailers say shoppers began tiptoeing back in November. Roberto Chiappelloni, 59, is one beneficiary. His Manfredi Jewels, in the premier shopping district on Greenwich Avenue, recently sold a Greubel Forsey watch for $490,000. Sales since December have doubled from the same period last year and rising compensation on Wall Street is driving traffic, he says.

Not including stock options and other types of deferred pay, Wall Street dished out $20.3 billion in bonuses in 2009, up 17 percent from a year earlier, according to the New York State Comptroller.

National Review: Foreclosures Will Solve Housing
by Larry Kudlow

March 30, 2010

With everybody focused on health care, and its new entitlement spending and taxing, the administration has tried to sneak in another bailout for housing. Yet again, Team Obama is rewarding reckless behavior, punishing the 90 percent of responsible homeowners who are making good on their mortgages, and setting up a greater moral hazard that will surely lead to an expansion of bailout nation.

I’m talking about an add-on to HAMP, the $75 billion Home Affordable Modification Program, which has been a dismal failure. In fact, the entire foreclosure-prevention effor—– including forgiveness of mortgage-loan principa—– has been a failure.

The Office of the Comptroller of the Currency reports that nearly 60 percent of modified mortgages re-default within a year. And now comes a new brilliant idea that if you live in your main residence, have a mortgage balance of less than $729,750, owe monthly mortgage payments that are not affordable (meaning greater than 31 percent of income), and you demonstrate a financial hardship, the government will subsidize you by offering TARP money to banks and other lenders to reduce your outstanding mortgage balance.

Former Bush economist Keith Hennessey highlights the outrage that Team Obama would actually subsidize people making up to $186,000 a year who have a mortgage balance of over $700,000. This isn’t even a middle-class entitlement. It’s an upper-middle-class entitlement. Actually, at $186,000, it’s virtually a top-earner entitlement, according to Team Obama’s definition of rich people eligible for tax hikes.

I mean, for a measly $14,000 more in income, the White House will jack up your top personal tax rate and your capital-gains tax rate. But now, for just less than $200,000, you get a brand new spiffy forgiveness plan for your mortgage.

It’s a complete outrage.
…

There’s the problem right here:

America’s Standard of Living Unsustainable

http://finance.yahoo.com/tech-ticker/u.s.-standard-of-living-unsustainable-without-drastic-action-former-top-govt.-accountant-says-458329.html?tickers=%5Edji,%5Egspc,dia,spy,tlt,IXJ,xlv&sec=topStories&pos=8&asset=36810cfdd36e07d0d04f670a8a98381c&ccode=mp

“Institutional bond traders, like my bank trader friend who runs $1 billion in bonds for a city, are on what is best termed a “buyer’s strike”, and have been for months now. My view is we are already in a bear market in bonds, one that is set to accelerate drastically. Bond traders are probably more ruthless than equity traders, generally speaking. They take less risk, which is why they focus on bonds. The bond traders are watching the equity market and won’t end their bond buying strike unless the equity market takes a solid hit. The bond traders are miserable right now. Not only are they on a buyer’s strike, they are losing money on their existing positions. Bottom line: They want the equity market to get hit. Bond auctions are starting to go bad. The US govt, the biggest issuer of bonds in the world, ironically needs the equity market to fall, to bring back bond buyers who would respond to the fall by buying bonds”.

~ Stewart Thomson ~ Graceland Updates

Soybeans plummet after report shows ample stockpile; 2010 likely to set new production record

NEW YORK (AP) — Soybeans led a big sell-off in grains trading Wednesday after the government reported that stockpiles of beans are larger than expected. The Agriculture Department also said 2010 looks to be another record year of production.

May soybeans fell 39.5 cents, or 4.1 percent, to $9.345 a bushel in midday trading. Wednesday’s slide was similar to the drop in early January after a crop report showed bigger-than-expected soybean production.

“They found more soybeans than (traders) ever imagined,” Richard Feltes, director of commodity research for MF Global, said of the USDA’s latest plantings report.

The department also said farmers intend to plant 78.1 million acres of soybeans in 2010. That would be less than 1 percent more than last year, but still set a new record.

Feltes noted that farmers will likely end up planting even more soybeans and corn than are estimated in the initial report. That would extend the pattern of the past two years. Corn for May delivery fell 8.25 cents, or 2.3 percent, to $3.4625 a bushel.

The USDA estimates farmers will plant 88.8 million acres of corn this year, a 3 percent jump from each of the past two years.

Wheat prices also fell, dropping 14.25 cents, or 3 percent, to $4.5775 a bushel.

Farmers expect to plant 9 percent less wheat in 2010, but they ended up planting 2 percent more winter wheat than previously estimated, the USDA said. A total of 53.8 million acres of wheat are expected to be planted this year.

Meanwhile, metals mostly rose as the dollar dropped. Metals including gold and silver.

WBUR
The Depreciating American Dream: Homebuyer’s Remorse
LISTEN NOW
By CURT NICKISCH
Published March 29, 2010

Owning a home has long played a significant role in the American story; the notion that buying a house is the stepping stone to wealth and happiness goes back a long time. But the housing bubble has burst, and many local homeowners are living in the shadow of the white picket fence. This is Part 1 of a WBUR series: The Depreciating American Dream.

The SANGSTER FAMILY in Mattapan · Photos by JESS BIDGOOD for WBUR

BOSTON — Calvin and Ateiya Sangster thought they were doing the right thing for their one-year-old son and unborn daughter, thought they were laying the foundation for a life of prosperity. Four years ago, they bought a condominium in Mattapan.

Soon after moving in, there was a candle in the driveway. Turns out, Ateiya’s coworker put it there.

“She happened to come to me and say, ‘Oh, you live at this address?’ ” Ateiya said. “And she’s like, ‘Yeah, I put that there for my brother. He was killed in your driveway.’ So, you know, it was kind of too late, we was already there when we started finding out a lot of things about the street.”

Things like the man who squatted in the foyer of their building. Or the addicts that rang their doorbell. They’d ask for one, two dollars, Ateiya says. Another time her wedding ring was stolen.

But none of that compared to the summer day when they had their windows open. Ateiya and Calvin heard two people arguing — right outside — on the sidewalk. They went to the window to see what was going on.

“They just started fighting and tussling,” Calvin said. “And once he had the guy on the ground he pulled out the gun and started shooting him with it.”

Their newborn daughter was in the room, too.

“And that’s where we were like, ‘We can’t keep her up here anymore,’ ” he said. “It’s just too much going on out here. I can’t wait to get off of this street.”

Now Calvin wonders why they were in such a hurry to get on the street — why they were in such a hurry to buy.
…

Delinquent Borrowers Catch Up on Insured Mortgages (Update2)

March 31 (Bloomberg) — Borrowers who caught up on overdue mortgages outnumbered people who became newly delinquent on insured home loans for the first time in almost four years. PMI Group Inc. led mortgage insurers higher in New York trading.

In February, 68,675 homeowners with privately insured mortgages fell into default, compared with 80,758 who got back on track, a report today from the Washington-based Mortgage Insurance Companies of America said. In January, MICA reported 52,528 new defaults and 31,616 cures. The trade group last reported that recoveries exceeded defaults in March 2006.

“The significance is substantial, it’s enormous,” said Matthew Howlett, an analyst with Macquarie Group Ltd. Recoveries outpacing new defaults “signals a turning point” for mortgage insurers, he said.

MGIC Investment Corp., the biggest U.S. mortgage insurer, No. 2 Radian Group Inc. and No. 3 PMI are facing fewer claims as the economy recovers and the Obama administration works with the nation’s biggest banks to prevent foreclosures. Philadelphia- based Radian, which has reported three straight annual losses, said in February that delinquencies were slowing and may fall this year.

“We know there has been a slowdown in new defaults,” Radian Chief Financial Officer C. Robert Quint said on a Feb. 23 conference call with analysts and investors. “I actually expect it to be flat and slightly down throughout the year.”

OK Go - This Too Shall Pass - Rube Goldberg Machine version - Official

http://www.youtube.com/watch?v=qybUFnY7Y8w

I just looked at the back of my office wall, where the original Credit Suisse mortgage reset chart is located. The Option-ARM and Alt-A tsunami is due to start rolling in this April, rising to a peak over the summer.

Just listening to Dave Ramsey, never heard him before. He is telling folks that housing is turning around. “Anyone who can hold on for 24 months will be very happy”. “Stop listening to the news” So where did he get his crystal ball? From sponsors of his show?

Everyone is an expert an know things about the future that others do not.

Clipped from~ Martin Weiss ~

The Fed says it’s ending its purchases of more than $1 trillion in mortgage-backed securities today.

But, to hear the financial press tell it, you’d think that after today, the Federal Reserve will also stop creating money out of thin air.

Do NOT believe it —
NOTHING could be further from the truth!

Look: The reason the Fed has spent all this money to buy up bonds is very simple: Without the Fed’s money, the bond market would collapse.

The U.S. Treasury is selling its bonds at the rate of $1 trillion per year. Fannie Mae, Freddie Mac and other government agencies are selling bonds at a similar clip. But where are the buyers? Are they rushing in to buy these bonds? Heck no! They’re either slashing their purchases or actually selling. China, for one, has already dumped nearly ALL of its U.S. mortgage bonds.

The ONLY consistent big buyer in the U.S. bond market has been the Federal Reserve!

Meanwhile the U.S. Treasury is borrowing money like there’s no tomorrow. In just one week recently, it issued $236 billion in government debt in a single week — the most in the history of the world!

Paterson’s threat comes as unionized state workers on Thursday are set to see their pay go up by 4 percent; creating an additional $400 million in payroll costs this year. (AP Photo/Seth Wenig)
Paterson threatens layoffs if unions won’t take cuts
NEWS ALBANY BUREAU ~ March 31, 2010

ALBANY — State workers risk “massive” layoffs later this year if their unions don’t agree to concessions to help the state erase its deficit, the Paterson administration warned Tuesday.

The threat comes as unionized state workers on Thursday are set to see their pay go up by 4 percent — creating an additional $400 million in payroll costs this year — under the terms of a contract negotiated by former Gov. Eliot Spitzer.

At a time when public- and private-sector unions around the country have agreed to pay freezes or cuts, the big public employees unions for state workers are refusing to go along with efforts to cut what Gov. David A. Paterson proposed as $250 million in work force savings this year, officials said.

“It’s just frustrating that they won’t even agree to the slightest bit of inconvenience,” said an administration official with knowledge of the talks between the state and its two largest unions — the Civil Service Employees Association and the Public Employees Federation.

“I think they’re disconnected from the real world,” said the administration source, who spoke on condition of anonymity.

It’s a tough time in U.S. economic history for pols to maintain their ratings.

Poll: More blame Obama for poor economy, unemployment

PUBLIC OPINION

From Truman to Obama, see each president’s ratings with USA TODAY’s approval tracker.

By Susan Page, USA TODAY

WASHINGTON — Americans anxious about unemployment and the economy increasingly blame President Obama for hard times, a USA TODAY/Gallup Poll finds, amid signs of turbulence in November’s midterm elections.

Last week’s jubilant signing of the health care overhaul, Obama’s signature domestic initiative, seems to have given the president little boost. Instead, his standing on four personal qualities has sagged, and 50% of those surveyed say he doesn’t deserve re-election.

“People are still hurting; a lot of people are still struggling, and I think a lot of what we’re seeing in the polls reflects people’s views on the economy,” says Rep. Chris Van Hollen, head of the Democratic Congressional Campaign Committee.

“At the same time, things have been improving. Clearly the economy is growing again,” Van Hollen said. “I believe that if we begin to see positive job growth, people’s confidence will return and that will change the dynamic.”
…

A friend of mine who runs a radio program has asked me for possible questions to ask his guest next week, Michael Lewis (The Big Short / Liar’s Poker). If anyone has some thoughts, I’ll be sure to incorporate them into a list.

The post-WWII presidential approval tracker is chock-full of fascinating information.

For instance:

- JFK appears to have enjoyed the highest average approval level, perhaps related to his limited time in office.

- BO has a long way to go before approaching the depths of his predecessor’s dismal approval ratings after eight years in office.

- Only Harry Truman’s approval ratings neared the height of popularity reached by both Bush presidents.

- The three presidents who had the highest-ever approval ratings (Harry Truman and the two Bush presidents) also had the largest declines in popularity, falling in each case from levels approaching or exceeding 90 percent approval to levels in the 20-30 percent range. (By contrast, Nixon was never that popular to begin with.)

Abu Dhabi’s oil reserves to last another 150 years
Emirate is blessed with 95 per cent of the UAE’s oil reserves and 92 per cent of gas. March 31, 2010 (REUTERS)

Oil-rich Abu Dhabi is on a strong growth trajectory and the emirate will remain in a strong economic position in the future, too, after having weathered the economic downturn considerably well.

The figures quoted in a new report by Isthmus Partners ‘Abu Dhabi Investment Environment’, shows that with 33 per cent of the country’s population, the emirate contributes around 60 per cent to the UAE’s GDP and has a GDP per capita of 1.8 times the national average.

“Abu Dhabi has one of the highest GDP per capita in the world. Even on a standalone basis, Abu Dhabi would be the second-largest economy in the GCC after Saudi Arabia,” said the authors of the report stressing the economic clout of the capital city.

The emirate is blessed with 95 per cent of the UAE’s proven oil reserves and 92 per cent of UAE’s gas reserves. Based on current utilisation rates and no additional discoveries, Abu Dhabi’s oil reserves will last for 150 years, said the report.

This should come as no surprise…Take U.S. taxpayer dollars and invest is labor over seas. Where are the “green” jobs again? Barry

BP’s Solar Retreat Signals Exodus of U.S. Renewable-Energy Jobs

(Bloomberg) — BP Plc’s decision to halt U.S. output of solar panels may help short-circuit President Barack Obama’s plan to create thousands of jobs in renewable energy.

BP, Europe’s second-largest oil company, said March 26 that it’s stopping manufacturing at its Frederick, Maryland, solar plant and cutting 320 jobs because of high costs and declining panel prices. The announcement came seven weeks after London- based BP said the division that includes solar and wind power was losing almost $183,000 an hour.

Solar companies are ramping up manufacturing in Asia even as they take government incentive funds to hire in the U.S. Suntech Power Holdings Co., which got $2.1 million to assemble panels at a 70-worker plant in Arizona, will employ 11,000 people in China to build components. Tempe, Arizona-based First Solar Inc. plans to do 71 percent of its manufacturing hiring in Malaysia after getting $16.3 million in federal funding to hire 200 people at an Ohio plant.

“We’re creating green jobs, for sure, but they’re in China or Malaysia or India,” Maryland State Senator Alex Mooney, a Republican whose district includes the shuttered BP factory, said today in a telephone interview. “We’re losing these valuable manufacturing jobs, and that’s a concern.”

The Obama administration predicted late last year that $80 billion in stimulus spending on renewable-energy initiatives would help create more than 700,000 jobs. Vice President Joe Biden said the stimulus package was contributing to “unprecedented growth” in the solar and wind industries, according to a December memo distributed to the media.

“Yes, it does appear that a fault-line is widening in America. The upper classes are educated…smart…and they have money. They can compete with the elites of any country on earth”.

But the middle/lower classes have a problem. They’re used to getting paid the wages of a rich, developed country. But they don’t really have any more skills than people in India or Mexico or Russia. For thirty years the average hourly wage for an American working man has remained stagnant as more and more unskilled labor came on line. Much of it came as legal and illegal immigration from Latin America. And the rest came from labor outside the US.

China mastered the business of making things to export into the US. India took the lead in service industries, where their English-language skills could be put to work.

But there are still hundreds of millions of people who earn practically nothing; there are 500 million people in India who live on less than $3 a day, for example. As long as these people are still entering the global workforce, it’s hard to see how unskilled Americans can expect to earn more money.

“This is just part of the Great Correction that Americans must live through. They have to pay down (or default on) debt – as much as $20 trillion worth – while their incomes are under pressure from competition at home and abroad…and the US economy suffers a prolonged, Japan-like slump”.

~ B.Bonner ~ TDR

A closely watched pot never boils to death the frogs swimming in the water.

Mark Hulbert

March 31, 2010, 12:01 a.m. EDT

Bearish on bonds
Commentary: Why bond yields may be headed much higher

By Mark Hulbert, MarketWatch

ANNANDALE, Va. (MarketWatch) — It’s always dangerous to think you know more about something than does the market itself.

And this is especially the case when it comes to bonds, since the fixed-income market is the largest and most liquid in the world, and its participants include some of the best and brightest of the entire investment arena.

But that does not deter Dan Seiver, who confidently predicts that yields are headed higher over the next year or two, with the 30-year Treasury yield (TYX 47.15, -0.42, -0.88%) very likely hitting the 6% level. If he’s right, of course, then Treasury bond prices are headed much lower.

Seiver is a visiting finance professor at San Diego State University and editor of an investment advisory service called the PAD System Report. He deserves to be listened to because his rate forecasts have been mostly on target over the last year. ( Read my Dec. 15, 2009, column.)

Seiver’s arguments for why rates are headed higher are familiar: The economic recovery is gathering steam; government deficits are larger than even the pessimists were predicting a couple of years ago that they would be — and getting worse; the government’s bond rating is in danger; inflation will continue to worsen; the dollar will continue to lose value; the Federal Reserve eventually will have to end its quantitative easing; and the demographic trend towards an increasing proportion of society in retirement will overwhelm Social Security, Medicare and other government programs, to name a prominent few.

But none of these arguments is new. Why, I asked Seiver in an interview earlier this week, is the rest of the bond market looking at these same phenomena and not agreeing that rates are headed much higher?

By way of an answer, Seiver referred to a number of behavioral factors that keep many bond traders and investors, if not most, from recognizing the reality of the situation.

Take the terrible state of government finances these days, which is awful and getting worse. Seiver believes that Americans are not very good at responding, since there is no one well-defined crisis point.

“Americans are good at dealing with acute crises,” Seiver said, such as the 9-11 terrorist attacks. The deterioration of government finances is, in contrast, long-term and gradual. Instead of an acute crisis, it’s a matter of “steady erosion.”

It’s reminiscent of the oft-quoted difference between throwing a frog into boiling water, on the one hand, and gradually heating the water in which he is already swimming, on the other. In the former case he will immediately jump out, whereas in the latter case he will eventually boil to death.
…

Need some IT advice, if someone knows what is going on.

Opened my e-mail this morning, had a bunch of “Delivery Fail” notifications in my Inbox (Microsoft Hotmail). All were old/dead e-mail addresses I haven’t used in a while. Now some of my “good contacts” are replying…

From what it looks like, somebody somehow hijacked my e-mail account and address list, and are forwarding spam “Canada drug” advertisements on my e-mail account.

How The Fook did that happen? And what do I have to do to fix it?

Beware the words of economists who talk about economic reality.

The Financial Times

Watch out for sovereign debt black holes

By David Roche and Bob McKee

Published: March 31 2010 17:51 | Last updated: March 31 2010 17:51

Will the next step in the credit crisis centre on sovereign debt? And what would that mean?

My co-author and I argue that high levels of sovereign debt will, at best, mean significantly below-trend economic growth over the rest of this decade. At worst, there will be a series of sovereign debt defaults that will ricochet through some leading economies and plunge the global economy back into recession.

Sovereign debt is normally deemed risk-free. It is the touchstone by which other riskier financial assets are priced. It forms the core of low-risk portfolios destined to fund such real social needs as pensions and casualty and cataclysm insurance. It is the liquid asset that lies at the heart of current regulatory reforms to oblige banks to hold sovereign debt in proportion to their exposure to riskier assets and potentially illiquid short-term funding.

A repricing of sovereign debt as dangerous debt would be an earthquake for financial markets. It would blow a hole in the balance sheets of previously safe financial institutions. That would be a new chapter in the credit crisis. But it would be a logical progression.

During the financial crisis, far from being a substitute for private sector deleveraging, which is only at an incipient stage, the state has piled on its own layers of debt. Leverage has never been higher. Government dissaving in the form of structural primary budget deficits equivalent to 9-10 per cent of gross domestic product has been added to already inadequate levels of household savings. If over-indebtedness and lack of thrift were the causes of the credit crisis, the policy prescription has been to give the dope fiend more dope.

By the end of this year, sovereign debt in Organisation for Economic Co-operation and Development countries will have exploded by nearly 70 per cent from 44 per cent of GDP in 2006 to 71 per cent. According to the Bank of International Settlements, it would take fiscal tightening of 8-10 per cent of GDP in the US, the UK and Japan every year for the next five years to return debt levels to where they were in 2007.

Some say that a temporary increase in sovereign debt always happens after a credit crisis. Research by US economists Carmen Reinhart and Kenneth Rogoff shows that sovereign debt usually rises by an average of 85 per cent within three years of a financial crisis. But this credit crisis is like no other. Our own calculations show that the budget deficits of crisis-struck countries now equal more than 25 per cent of global savings and 50 per cent of savings within the OECD. And the increase in debt ratios is on a different scale because it simultaneously affects all the big economies, not just an Argentina.

Studies by the IMF and by Reinhart and Rogoff also show that there exists a tipping point – when sovereign debt breaches 60-90 per cent of GDP – beyond which the impact of more state spending is to reduce growth and even to make the economy shrink. Sovereign debt is already (or is set to rise) above such a tipping point in the US, the UK and the eurozone. It is already more than twice that level in Japan. This means rich countries will lack a dynamic core to help them grow their way out of their debt spiral by boosting GDP. Indeed, if growth falls below the yields on their bonds, these countries will become sovereign black holes in the universe of credit, with uncontrollable upwardly spiralling debt levels.
…
EDITOR’S CHOICE
Gillian Tett: ‘Canary in coal mine’ heralds bond trouble - Mar-29
Swap rate falls below 10-year Treasury yield - Mar-23
Treasury issuance hits swap rates - Mar-15
Bondholders assess impact of US mortgage action - Mar-29
Fed exit looms over US mortgages - Mar-25

Factory orders rise for 10th time in 11 months
Factory orders rise modestly in February as manufacturing powers economic recovery

WASHINGTON (AP) — Factory orders rose in February, bolstered by strong demand for industrial machinery and commercial aircraft. It was the 10th increase in 11 months as manufacturing continues to provide crucial support for the nation’s economic recovery.

“We’re not a red-hot economy,” said Tim Quinlan, an economist at Wells Fargo. “But the recovery is still plodding along.”

Manufacturers, which were hit hard by the recession, are benefiting from overseas orders and increased business spending on capital equipment. Quinlan estimates that factory orders fell by about 25 percent during the recession but have recovered about one-third of that amount since last spring.

The Commerce Department said Wednesday that new orders rose 0.6 percent last month, just ahead of analysts’ estimates for a 0.5 percent increase, according to Thomson Reuters. Still, that was the lowest uptick since August 2009.

Smith Electric Vehicles gets $22M more from the U.S. Department of Energy
Kansas City Business Journal

Smith Electric Vehicles U.S. Corp. is getting $32 million in federal money to help develop future all-electric vehicles and to provide customer incentives.

U.S. Sen. Claire McCaskill, D-Mo., on Wednesday announced the award, which provides a $22 million boost to the original $10 million Department of Energy grant awarded to Smith in August.

“This award recognizes Smith’s leadership role in building the foundation for an all-electric commercial truck industry in this country,” McCaskill said in a statement.

In yet another sign the housing bubble has reflated to a healthy girth, here is a report on increased flipping activity in the SF Bay area:

Bloomberg
Pace of house flipping picks up

Robert Selna, Chronicle Staff Writer

Tuesday, March 30, 2010

Luis Jimenez bought and remodeled this home in Richmond, and he is now in contract to sell it at a profit.

When Luis Jimenez bought a two-bedroom house in Richmond from a bank last year for $46,000, he joined the ranks of Bay Area real estate investors, who in 2009, purchased homes in moderate-priced ZIP codes, siphoning off housing inventory and resuscitating neighborhoods hit by foreclosures - but also pushing out some first-time home buyers.

Jimenez, a handyman and construction worker, spent about $14,000 renovating the house and now is in contract to sell it for $110,000 after eight prospective buyers made offers.

Bay Area bidding wars were big news in 2005-06 at the height of the housing bubble. They were driven by buyers who feared they would lose out on the American dream if they didn’t act fast, and by investors, who imagined no ceiling to rapidly rising prices.

Multiple offers made a comeback in 2009 and early 2010, but this time around they occurred mostly in below median-priced areas, and were propelled significantly by investors buying bank-owned properties.

A Chronicle analysis of sales data from MDA DataQuick, a San Diego real estate research firm, shows that house flipping activity - where a home is bought and quickly resold - increased from 2008 to 2009 in several Bay Area ZIP codes.

For instance, the Pittsburg ZIP code 94565 had 52 flip sales in 2009. In 2008, it had 13.

DataQuick defines a flip as a recently purchased home that had previously sold within 21 to 180 days prior. The firm’s data do not capture homes bought at auctions.

But other figures show that investor buying at public foreclosure auctions also has boomed.

According to research firm ForeclosureRadar.com in Discovery Bay, the number of houses in the nine-county Bay Area purchased by investors at public auctions jumped from 122 in January 2009 to 637 in January 2010. February 2010 saw similar increases.
Types of investors

Investors are not monolithic. Some are individuals, similar to Jimenez, who pooled his funds with family members in hopes of getting a leg up. Others are investor groups and real estate investment firms that buy scores of homes in succession or all at once.

The characteristic the investors have in common is that they tend to pay cash, placing them a step ahead of buyers using mortgage loans, which often involve more paperwork and are less certain to come to fruition.

“We’ve seen a notable increase in investors over the past year,” said John Robin, a Realtor with Keller Williams in the East Bay, who represents Jimenez and primarily works with investors. “At the beginning of 2009, there was a big spike in foreclosures and the places that had the biggest inflation in the boom had the biggest cuts.”
..

“This… is the Twilight Zone”

Doo-dee-doo-dah-doo-dee-doo-dah…

The Financial Times
‘Canary in coal mine’ heralds bond trouble
By Gillian Tett

Published: March 29 2010 19:45 | Last updated: March 29 2010 23:49

In recent years, a key axiom that every investment manager learnt at school (or, more accurately, in an MBA class ) was that the rate at which triple A-rated countries such as America could borrow money could be labelled the “risk-free” rate – and corporate (and) other borrowing costs could be measured against it.

But is it time to rethink that “risk-free” tag? If you look at what is happening in the US and UK interest rate markets right now, the answer is “yes”. From time immemorial, it has been taken as self-evident that the swaps spread in debt markets should be “positive”. What this so-called “swaps spread” essentially measures is the cost of borrowing funds in the Libor market (for a private companies, such as banks), minus the cost of raising government debt.

And, since the private borrowing costs are influenced by credit and counterparty issues (ie: whether banks default or fail to repay), logic suggests those Libor rates should be higher than sovereign borrowing rates.

After all, triple A-rated central government is supposed to the safest thing about. But now, as my colleagues Michael Mackenzie and David Oakley first reported two weeks ago, something bizarre is going on. Back in late 2008, after the collapse of Lehman Brothers, the 30-year swap spread turned negative, when the markets froze amid wider financial chaos.

At the time, that swing did not grab many headlines, partly because the 30-year market garners little attention in the US. However, last week the closely watched – and vastly more influential – benchmark 10-year swap spread turned negative too, as 10-year Treasury yields spiralled up towards 4 per cent and above the 10-year swap rate.

That may simply be a temporary aberration. After all, the swaps market is not a perfect barometer of macroeconomic conditions and some unusual supply-demand imbalances seem to be distorting the market.
…
Temporary aberration… Phew! Had me worried there for a second.
…
EDITOR’S CHOICE
Swap rate falls below 10-year Treasury yield - Mar-23
Treasury issuance hits swap rates - Mar-15
Bondholders assess impact of US mortgage action - Mar-29
Fed exit looms over US mortgages - Mar-25

Poor babies. How are they going to afford their gobjillion dollar homes if their pay keeps falling?

CEOs See Pay Fall Again

Top executives collected less pay in 2009, the first time in 20 years that compensation declined for two consecutive years. Median pay for top 200 chief executives was $6.95 million.

Kai Ryssdal from Marketplace just ended the show by pointing out that the Fed’s purchase of MBS ends today. He then pointed out that the stock market started its current bull run when the Fed started these purchases in March 2009.

His unspoken question? Is this simple correlation, or cause and effect?
His unspoken implication? If it’s cause and effect, look out below.

A housing stimulus measure too far?

* REVIEW & OUTLOOK
* APRIL 1, 2010

The Permanent Mortgage Crisis
One more housing bailout to prolong the market agony.

Last Friday the White House announced its latest plan to prevent mortgage foreclosures, and earlier this week the famous Case-Shiller index found mostly flat home prices in January with analysts warning about a new wave of foreclosures to come. You can’t blame the latest proposal for that outcome, but what about the previous 10 or 20 federal housing rescue plans?

We’re supposed to believe that this latest effort to build an artificial floor under home prices will perform better than the Hope Now Alliance announced by President Bush in October 2007;

and certainly better than Mr. Obama’s year-old Home Affordable Modification Program to offer mortgage modifications to troubled borrowers or his companion program to offer generous refinancing. We could go on, but you get the joke, even if the housing market hasn’t.

Here’s a heretical thought: What if Washington had simply let housing prices fall on their own to find their natural bottom? The pain would have been more severe more quickly for some owners who bought more expensive homes than they could afford. But the pain might also be over by now as housing markets cleared faster, and housing might be contributing to a healthier economic expansion.