The Housing Bubble

Bernanke Impoverishing Grandmothers to Benefit Wall Street Bankers
By James Quinn
08/15/2011

A system of capitalism presumes sound money, not fiat money manipulated by a central bank. Capitalism cherishes voluntary contracts and interest rates that are determined by savings, not credit creation by a central bank.

- Ron Paul

I wonder what goes through Ben Bernanke’s mind as he sits in his gold plated boardroom in the majestic Marriner Eccles building in Washington DC and decides to impoverish grandmothers in order to further enrich Wall Street bankers. He just pledged to keep interest rates at zero percent for two more years. Ben is a supposedly book smart man. Does he have no guilt or shame for what he has wrought? How does he sleep at night knowing he has created bloody revolutions around the globe due to his inflationary zero interest policy? People are dying because he has decided that an elite group of Wall Street bankers who recklessly brought down the worldwide financial system in 2008 deserve to be kept alive and enriched at the expense of the many.
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AUGUST 23, 2011, 3:19 P.M. ET

US Stocks Surge In Final Trading Hour

By Steven Russolillo
Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)–U.S. stocks registered sharp gains despite another bleak dose of economic data as investors grew increasingly optimistic that Federal Reserve Chairman Ben Bernanke will act later this week to spur economic growth.
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Bank of America was a notable laggard Tuesday amid a sea of green. The stock dropped 2%, on top of Monday’s 7.9% slide, as analysts worry about the bank potentially needing to raise a significant amount of capital as well as continued mortgage litigation woes. Bank of America shares have tumbled more than 35% this month.

Investors largely overlooked Tuesday’s release of the Richmond Fed’s regional manufacturing survey, which showed economic activity in the central Atlantic region declined sharply in August. The report attracted more attention than usual ahead of its release after dismal readings last week from the New York Fed’s Empire State index and the Philadelphia Fed’s index of manufacturing activity.

Instead, the market remains fixated on Federal Reserve Chairman Ben Bernanke’s scheduled speech in Jackson Hole, Wyo., on Friday. Investors are looking for potential signs of additional measures to stimulate the economy.

The Fed has opened the door to new easing measures, but investors are unclear as to what Bernanke has in store.

“When you have weak reports like we’ve seen from the regional manufacturing surveys, they’re basically giving Bernanke the breathing room to do whatever is necessary to act as a backstop measure for the economy and the markets and keep things from unwinding further,” said Jason Pride, director of investment strategy at Glenmede.

Many analysts say the Fed doesn’t have as much political support to announce a third full-fledged bond-buying program, commonly known as quantitative easing, or QE3.

“I scratch my head in thinking what Bernanke is going to do or say at this point,” said Maury Fertig, chief investment officer at Relative Value Partners. “I’m more concerned that if they put a QE3 in place, what if the market yawns? Then what?”
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Aug. 24, 2011, 12:01 a.m. EDT
How to get ready for a double-dip recession
By Robert Powell, MarketWatch

BOSTON (MarketWatch) — It’s not a recession yet. Neither comprehensive data for July nor the more spotty data for August confirm this, according to David Kelly, chief market strategist for J.P. Morgan Funds.

But saying it’s so will probably make it so. “Overall, the chorus of economists and strategists predicting recession has grown louder in recent days and the withering impact of these pronouncements on confidence is sadly boosting the chances that they could be right,” Kelly just wrote in his weekly commentary.

Sam Stovall, the chief investment strategies for Standard & Poor’s Equity Research, is also among those who are preparing for the worst. “If the market action in 2008 taught us anything, it was: Be proactive and expect the worst,” Stovall wrote in his weekly commentary.
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Want To Know Wall Street’s Dirty Little Secret?
Aug. 22, 2011

WSJ Money & Investing Editor Francesco Guerrera stops by Mean Street and tells the story of Wall Street’s dirty little secret: traders don’t always follow the advice they give to their customers. AP Photo/Petr David Josek

To answer drummnj’s question of yesterday more seriously than my “hunch-based” answer of yesterday, suppose there was a cartel of G-7 central bankers who could either protect individual investors in gold or could protect money center banks (not to mention themselves) which are heavily invested in fiat currencies. Which group do you think their policies would be designed to protect during the duration of a financial panic?

Aug. 23, 2011, 10:08 p.m. EDT
China’s gilded gold market
Much of the growing gold demand has been driven by individuals
By Fu Tao and Sun Yanxia

BEIJING ( Caixin Online ) — At 350 tons per year, China is the world’s largest producer of gold. And yet China’s statistics show that the country has been a net gold importer since the 1990s. Gold imports and exports have been tightly controlled by the People’s Bank of China, though new avenues for investment have emerged in recent years.

Marcus Grubb, the managing director of investment research and marketing for the World Gold Council (WGC), in June said that the world gold price had yet to fully internalize the additional demand that China’s investors and consumers were bringing to the table.

At the time, the WGC had just published figures that showed China’s demand for gold surpassing that of India for the first time. This has led many to ask where China’s gold market is headed next and to wonder how China’s expanding gold imports might apply upward pressure to global gold prices.

Silence golden at PBOC

One gold investor joked: “If the central bank were to signal that it was going to buy gold, the price would reach $2,000 overnight.”
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Fallout from the Fed’s secret $1.2 trillion bank bailout
August 23, 2011, 12:12 PM
By Kurt Brouwer

Did you know the Federal Reserve secretly loaned up to as much as $1.2 trillion to U.S. and foreign banks? This information has now been released and we even know the institutions that got the bulk of the funds. Can you say, Morgan Stanley (MS), Citigroup (C), Bank of America (BAC). Due to the inflammatory nature of this information, the Fed has been reluctant to share it with Americans, but now it has now come out due to a lengthy Freedom of Information Act (FOIA) investigation by Bloomberg.
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Housing bust leads to broken dreams, outrage
Aug 22, 2011

This editorial is being reprinted from the Detroit Free Press, where it was first published.

The horror of the nation’s housing bust has left a trail of broken dreams — and of outrage, much of which must now be directed at the government agencies ostensibly seeking to help distressed homeowners while simultaneously pushing many of them out the door.

But as an investigation by the Detroit Free Press showed, a big contributor to the horror has been Fannie Mae, the quasi-private mortgage giant that was bailed out by the federal government, in part to help salve housing woes.

The federal regulator who oversees Fannie Mae needs to act swiftly and decisively to stop the institution’s dissembling, and force it to keep more people in their homes, as federal housing programs and Fannie Mae’s own public statements demand.

While Fannie Mae publicly touted its efforts to keep people in their homes, it was privately telling banks to foreclose on a specific percentage of delinquent mortgage holders.

Fannie Mae also engages in outright lying: Promises not to foreclose on anyone who was still in the modification process were repeatedly broken.

From the outside looking in, it is difficult to assess how much of this is incompetence and how much is purposeful misrepresentation. From the top, where the Obama administration has seemed to sincerely want to help people stay in their homes, it must feel like pushing on a string.
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Consumer Negativity on Housing Continues
By David Morrison

The market for U.S. housing continues to be smothered by the weight of troubled real estate loans and choked on low consumer expectations of being able to get a home loan, according to a recent survey from Fannie Mae.

The now government-owned mortgage giant reported that its quarterly survey of consumer sentiment, the National Housing Survey, found that 26% of survey respondents reported being underwater on their current mortgage loans – owing more on the loan than the property is worth – an increase of 3% from the first-quarter survey.

Further the survey found that homeowners who reported being underwater on their mortgages, even if they were current on the loans, experienced greater degrees of stress about their finances and their debts.

Perhaps the biggest challenge for credit union mortgage marketers, fully 53% of the consumers surveyed said that it would be very difficult for them to get a mortgage today and that percentage climbed to 71% among renters.

“Consumers are more cautious due to concerns over employment and household finances,” said Doug Duncan, vice president and chief economist of Fannie Mae. “As a result, consumer spending, which accounts for about 70% of the economy, ground to a halt in the second quarter. Consumers are more hesitant to take on additional financial commitments, and a setback to confidence means a setback to the recovery of the housing market.”
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AUGUST 22, 2011, 10:31 A.M. ET
Fannie Mae Cuts Economic Growth Outlooks For 2011, 2012
DOW JONES NEWSWIRES

Fannie Mae (FNMA) cut its economic growth outlook for this year and next, while also predicting the probability of another recession is “close to a coin toss.”

The mortgage giant said it expects 1.4% growth this year, down from last month’s estimate of 2.4%. Meanwhile, for 2012, it predicted growth of 2%, down from its July forecast of 3.1%.

“Key factors, including revisions to gross domestic product data, have revealed that we have a bigger hole to dig out of, which explains the consumer angst over the lack of employment growth,” said Fannie Mae Chief Economist Doug Duncan.

Fannie also said housing activity, with the exception of the rental housing market, is expected to weaken along with the overall economy due to a renewed decline in business and consumer confidence and a softening hiring trend. The rental vacancy rate declined to 9.2% in the second quarter, the lowest rate in nine years, which Fannie said is consistent with a declining home-ownership rate and suggests a rising number of households have shifted to renting over owning.

Why does Uncle Sam insist on attaching strings to its bulk home sales? Couldn’t they actually sell those taxpayer-owned homes for more if they just offered them to the highest bidder, sans strings? (This is an application of Le’Chatelier’s principle, for anyone who cares.)

Feds want foreclosures sold in bulk to be rentals
by Catherine Reagor, The Arizona Republic - Aug. 23, 2011 05:03 PM

The federal government would like to sell some of its huge portfolio of foreclosure homes to investors who will rent them out.

These are houses with loans backed by Fannie Mae, Freddie Mac and the Federal Housing Administration that lenders and investors have foreclosed on and handed back to these federally owned agencies to take the losses on.

Last week, the U.S. Treasury Department and U.S. Department of Housing and Urban Development requested proposals from groups to buy the homes and turn them into rentals. The federal agencies didn’t mention a discount for buying the houses in bulk, but most investors will expect one.

The federal agencies say they want to pool the homes in portfolios, because the houses are selling too slowly on an individual basis.

What happened to the federal housing plan to help people modify their mortgages and keep their homes instead of losing them to foreclosure? An investor renting out the property likely will pay much less than what was owed on the mortgage.
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I note the recent rate of U.S. new home sales per capita is far worse than it was back in 1963, when the U.S. population was only 188m, compared to its present level near 309m.

Posted on Wed, Aug. 24, 2011

New-home sales fall again, on pace for worst year since ‘63
By Derek Kravitz
Associated Press

WASHINGTON - Sales of new homes fell in July for the third straight month, the government reported Tuesday in a sign that housing remains a drag on the economy.

If the current pace continues, 2011 would be the worst year for new-home sales in nearly half a century.

Sales fell nearly 1 percent in July to a seasonally adjusted annual rate of 298,000, the Commerce Department said. That’s less than half the 700,000 sales that economists say represent a healthy market.

Last year, 323,000 homes were sold, the worst year on records that go back to 1963.

While new homes represent less than one-fifth of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs and $90,000 in taxes, according to the National Association of Home Builders.

High unemployment, larger required down payments, and tougher lending standards are preventing many people from buying homes.

Plunging stocks and a growing fear that the United States could tip back into another recession also are keeping people from entering the housing market.

A slowdown in the U.S. economy has more than offset any boost from super-low mortgage rates, said Paul Dales, senior U.S. economist at Capital Economics.

“A new home is a luxury that many Americans can no longer afford,” Dales said.
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The rise in U.S. new home sales during Greenspan’s tenure at the Fed to well above their historic range and their subsequent collapse to 50-year lows in the aftermath is readily apparent from a glance at the chart for new U.S. home sales back to 1963, which is included in the article linked below. Perhaps the Housing Bubble should be rechristened the Greenspan Bubble?

I am quite certain that you could find many economists at the Fed who would be able to hold up their end of a conversation about the importance of obeying the economy’s natural speed limit. For instance, you can’t invest in residential housing at rates forever above the growth rate of the population without later suffering a day of reckoning.

New Home Sales Drop Again
Dirk van Dijk, CFA
August 23, 2011

New Home Sales in July fell 0.7% from June, to a rate of 298,000. Relative to a year ago, sales are up 6.8%. While the year-over-year rebound is more than welcome, it is still a very dismal rate of New Home sales.

Also, there was a downward revision to the June numbers of 12,000 to 300,000. Thus, relative to where we thought we were, it could be seen as a 4.5% decrease. The July level was worse than the expected rate of 310,000.

The 15 lowest months on record (back to 1963) for new home sales have all been in the last 15 months. New home sales have only exceeded the 400,000 level three times since September of 2008 when the financial markets collapsed. The most recent time was in April 2010, as sales were inflated by the rush to get in under the wire and collect the homebuyer tax credit. Sales collapsed after that, and July comp is thus an easy one.

Relative to the peak of the housing bubble (7/05, 1.389 million), new home sales are down 78.5%. Prior to September 2008, there had only been 20 months in which new home sales were below the 400,000 level, with the most recent being in 1982. The graph below shows the history of new homes sales (blue, left scale) along with the growth in population (red, right scale), since presumably if you have more people, you will need more places for them to live.

Take a very close look at the relationship between new home sales and the grey recession bars. New home sales fall sharply before all recessions (with the exception of the dot.com bust-caused recession of 2001) and then start to increase sharply in the middle of, or towards the end of, the recession. That clearly is not happening this time around.

If you want to know why the recovery has been anemic so far, look no further than the graph above! New home sales are vital to the overall economy. If new homes are not selling, then homebuilders have no reason to build more of them. After all, that is very expensive inventory to sit on.
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Markets await words from Fed’s Bernanke
By Heidi Moore
Marketplace, Monday, August 22, 2011

A year after the Federal Reserve chairman primed stocks with plans to buy up bonds, investors await a key speech for signs of another big move
Federal Reserve Chairman Ben Bernanke

Federal Reserve Chairman Ben Bernanke (Chip Somodevilla/Getty Images)

BOB MOON: Aside from Libya, of course, we still have our own problems at home — mainly, the economy. We had a recovery that felt like it wasn’t. Now, several Wall Street economists say we’re staring another potential recession in the face. What to do? Experts are divided: Should we try more federal spending to stimulate the economy, or just stop the government meddling and let it grow on its own?

Later this week, Federal Reserve Chairman Ben Bernanke will signal what, if anything, the central bank will try to do to make everyone happy. Our New York bureau chief Heidi Moore reports.

HEIDI MOORE: Federal Reserve Chairman Ben Bernanke has picked up several nicknames: Big Ben, The Bearded One.

Quincy Krosby is a strategist for Prudential Financial, and she likes another nickname.

QUINCY KROSBY: Ben Bernanke has become the “Market Whisperer,” if you will. When he speaks, the market listens.

The markets will be listening when Bernanke speaks at a gathering of economists later this week. And what do they want to hear?

PETER BOOCKVAR: If you’re in the market, you want to hear Bernanke throw more money from the sky. You want him to do something to save you.
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I guess all I can do now is sit on the edge of my seat and try and contain myself while I wait for “The Bernanke” to pull another rabbit out of a hat. I’ll be sure not to miss out on this magical event.

From “Sir Greenspan” to “Bernanke The Magnificant”

Bailout Update - $1.5 Trillion Still Owed To Treasury, Fed
Source - PR Watch

A new study released today by the Center for Media and Democracy (CMD) shows that, despite rosy statements about the bailout’s impending successful conclusion from federal government officials, $1.5 trillion of the $4.8 trillion in federal bailout funds are still outstanding.

The analysis, presented in charts and an online table and program profiles, is based entirely on government records. This comprehensive assessment of the bailout goes beyond the relatively small Troubled Asset Relief Program (TARP) program to look at the rest of the Treasury and Federal Reserve’s multi-trillion dollar response to the financial crisis. It shows that while the TARP bailout of Wall Street (not including the bailout of the auto industry) amounted to $330 billion, the government also quietly spent $4.4 trillion more in efforts to stave off the collapse of the financial and mortgage lending sectors. The majority of these funds ($3.9 trillion) came from the Federal Reserve, which undertook the actions citing an obscure section of its charter.

“In order to understand the big picture on the bailout, you have to look beyond TARP and examine the trillions the Federal Reserve has disbursed to keep the big banks above water. $4.8 trillion went out the door to aid financial companies and repair the damage they caused to financial markets, and $1.5 trillion of that is still outstanding,” said Mary Bottari, director of CMD’s Real Economy Project.

Most of the bailout funds were comprised of aid to banks – the peak outstanding amount was $2.2 trillion in January 2009 – which took place at the height of the financial crisis in the form of loans with below-market interest rates and for questionable collateral to banks directly from the Treasury and Federal Reserve.Outstanding Bank Support vs. Mortgage Lending Support - July 2011 - In Billions
Mortgage-Backed Securities Purchases

CMD’s study also shows how the government is continuing to prop up the same banks that caused the crisis in its attempt to help the housing market. The government’s housing program – which peaked at $1.6 trillion outstanding in July 2010 – is aimed at keeping mortgage lending flowing by subsidizing deals Fannie Mae and Freddie Mac make with the banks. Treasury and the Federal Reserve’s main approach has been to buy more than a trillion dollars worth of mortgage-backed securities from Fannie Mae and Freddie Mac so that the two government-sponsored enterprises can continue to purchase and bundle mortgages from the banks, which they sell to Fannie and Freddie at a profit. The banks also benefit from the hundreds of billions in direct loans the government has made to Fannie and Freddie, which the GSEs then turn around and make in insurance pay-outs to banks for mortgages that have gone bad.

This massive effort is in stark contrast to the mere $2 billion the Treasury has spent to directly help homeowners stay in their homes via the widely criticized Home Affordable Mortgage Program (HAMP) program. With housing prices continuing to falter and the United States approaching 9.2 million foreclosure filings since the beginning of 2008, HAMP can be described as nothing less than an abject failure.

“The Federal Reserve and the Treasury have spent $1.6 trillion in a bank-shot to save the mortgage lending market by using the same financial companies that got us into this mess,” said Conor Kenny, lead author of the study. “That’s more than 800 times what they’ve spent directly to keep homeowners in their houses, and the banks have made money off the whole thing.”

CMD’s analysis also shows how the $4.8 trillion bailout of the financial sector dwarfs the $600 billion that the Federal Reserve spent on the much-hyped “Quantitative Easing 2″ of 2010-2011 that was intended to help the broader economy – not just the financial sector – by lowering interest rates across the board and preventing deflation.

Buttonwood
Forty years on
An anniversary for the currency markets

Aug 13th 2011 | from the print edition

FORGET Watergate. For economic historians, Richard Nixon’s place in history is secure. He was the president who, 40 years ago, severed the link between global currencies and gold and ended the fixed-exchange-rate system.

Under the Bretton Woods regime, world currencies were pegged to the dollar, which in turn was tied to a set price of gold. Central banks had the right to convert their dollar holdings into bullion. But on August 15th 1971 Nixon, in the face of economic difficulties, closed the gold window, devalued the dollar against bullion and imposed a 10% surcharge on imports. The era of paper money and floating exchange rates had arrived.
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… there were no asset bubbles to speak of in the Bretton Woods era and (not coincidentally) scarcely any financial crises. Between 1945 and 1971, the worst calendar-year loss suffered on Wall Street was a 14.1% decline in 1957.

Perhaps the lesson of the past 40 years is that neither a fixed nor a floating-rate system is a panacea. Many governments have used currency pegs as a shortcut towards economic credibility without the structural reforms needed to ensure their economies remained competitive. Floating rates create the temptation for governments to drive down their currencies and grab a bigger share of world trade. That temptation is very strong at the moment and could lead to further political tensions if America opts for another round of quantitative easing. In a world of competing devaluations, gold keeps driving higher. It surged above $1,800 an ounce on August 11th. In terms of the old gold measure, the dollar has devalued by 98% since the end of the Bretton Woods era.

Financial markets
Hit me baby one more time
Markets will take any help they can get
Aug 13th 2011

ADDICTS always crave one more hit. With stockmarkets slumping over the past two weeks investors hoped that the Federal Reserve would unveil a third round of “quantitative easing” (QE), the creation of money to bolster asset prices, on August 9th. The second round, announced in August last year, had triggered an equity rally in late 2010.

Instead of pure heroin, investors got methadone in the form of a commitment from the Fed to keep rates at their current low levels for another two years. While Wall Street managed a late rally on the day (the Dow gained almost 430 points, or 4%), the Fed’s hit gave only a brief rush. Share prices resumed their fall on August 10th.

There was a more sustained reaction to the actions of the European Central Bank, which started buying Italian and Spanish government bonds on August 8th. Though the size of the buying programme was unknown, the effect on the bond markets was dramatic. The Spanish ten-year yield fell from more than 6% to 5% within two days.

At least the central banks are having a positive effect, however temporary. Politicians, meanwhile, have left investors with serious doubts about their ability to handle the crisis. European leaders have moved from an initial stance of denial about the seriousness of the region’s debt problems through a series of sticking-plaster solutions as the rot spread. American leaders, for their part, flirted with the prospect of a default before reaching a deal that neither helped the economy in the short term nor did enough to improve the government’s finances in the long term.
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Realtors Are Liars®

The earthquake is barely gone and now a hurricane’s a comin’.

I guess today should be emergency preparedness day… I check my food storage every three months or so, so I think I’m good. I doubt they’ll evacuate anyone, but I think I’ll take a trip to the store and the gas station just in case.

Wall Street is waiting with baited breath for BB’s rescue plan. With such widespread anticipation of a QE3 announcement this Friday, it is hard to conceive how the Fed could surprise to the upside.

Index Futures:
S&P 500 1,152.25 -6.25 -0.54%
DOW 11,078 -63.00 -0.57%
NASDAQ 2,112 -12.25 -0.58%

Aug. 24, 2011, 6:12 a.m. EDT
U.S. stock futures drop ahead of data
Bernanke’s Jackson Hole appearance remains main event
By William L. Watts, MarketWatch

FRANKFURT (MarketWatch) — U.S. stock futures fell Wednesday, pointing to a lower open for Wall Street after two days of gains as investors awaited data on demand for durable goods and Friday’s speech by Federal Reserve Chairman Ben Bernanke.

Futures on the Dow Jones Industrial Average (DJ1U -0.63%) dropped 76 points to 11,065. Standard & Poor’s 500 Index futures (SP1U -0.57%) declined 8.3 points to 1,150.30, while Nasdaq 100 futures (ND1U -0.56%) fell 14 points to 2,110.

“I think the market is in a wait-and-see mode” as investors weigh prospects the Fed chairman will signal readiness to delve further into the central bank’s tool box to deliver monetary stimulus, said Steen Jakobsen, chief economist at Saxo Bank.

Bernanke is set to address an annual gathering of international central bankers and economists in Jackson Hole, Wyo., on Friday.

Gains by U.S. equities on Monday and Tuesday after a four-week global rout were tied in part to speculation Bernanke would use the speech to signal the Fed would take additional actions, including possibly a third round of quantitative easing, or QE3, to counteract a flagging economy.

Bernanke used last year’s Jackson Hole speech to lay the groundwork for operations known as QE2, helping to trigger a months-long rally in equities.

Jakobsen, however, said surveys indicate expectations Bernanke will commit to further action are more neutral, leaving room for an upside surprise if the Fed chief delivers a more detailed plan.
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Major case of buyer’s remorse here.

No, I didn’t refinance the Arizona Slim Ranch to buy a hot little car. Nor did I buy a second Ranch to rent out “as an investment.”

What did I do?

I fell for a former coworker-turned New York Life agent’s sales pitch, that’s what. You’ve probably heard this pitch a time or two yourself: Life insurance that’s being sold as (cue up the drumroll) an investment.

It didn’t take much research to figure out that life insurance is protection against economic loss. Nothing more. Nothing less. It is not an investment.

As I’ve said here many times, I’m single and have no dependents. Which doesn’t exactly place me in the center of the target market for life insurance.

So, now it looks like I’m stuck with something I don’t really want or need. And I’m wondering how hard it would be to get out of the insurance contract and find some real investments. You know, the sort of thing that you don’t need an insurance agent to find.

Derek Kravitz,
AP Real Estate Writer
Tuesday August 23, 2011, 4:42 pm EDT

A telling sign of how bad things have gotten for the housing industry: Prices have dropped more since the recession started, on a percentage basis, than during the Great Depression of the 1930s.

And it took 19 years for prices to fully recover after the Depression.

Mandatory evacuations are ordered in our area any time the wind is expected to be above 50mph. Ambulances cannot drive above a 50mph wind speed. We are also on the coast with water and bridges all around. No orders yet but they are not meeting until Thursday.

All eyes are on Jackson Hole. Republicans believe the government has no business doing anything to preserve values in the labor market. The question for Republican Ben Bernanke is, how about the stock market?

US Mortgage Purchase Applications at 15-Year Low
24 Aug 2011 | By: Reuters

U.S. home mortgage applications for purchases fell to a nearly 15-year low last week as resurgent worries about the strength of the economy kept buyers at bay, an industry group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 2.4 percent in the week ended Aug.19.

The seasonally adjusted gauge of loan requests for home purchases tumbled 5.7 percent to its lowest level since December 1996, the MBA said.

Refinance demand also sagged as interest rates rose, with the refinance index slipping 1.7 percent.

“Another week of volatile markets and rampant uncertainty regarding the economy kept prospective homebuyers on the sidelines, with purchase applications falling to a 15-year low,” Mike Fratantoni, MBA’s vice president of research and economics, said in a statement.

“This decline impacted borrowers across the board, with purchase applications for jumbo loans falling by more than 15 percent and purchase applications for the government housing programs falling by 8.2 percent.” The refinance share of mortgage activity increased to 79.8 percent of total applications from 78.8 percent the week before.

Fixed 30-year mortgage rates averaged 4.39 percent, up from 4.32 percent.

GE Healthcare cutting 81 jobs
By John Schmid of the Journal Sentinel

GE Healthcare Ltd. is cutting 81 jobs at its Milwaukee and Waukesha facilities, or 1.2% of the company’s positions in southeastern Wisconsin, the medical technologies division of the General Electric Co. said Tuesday.

In response to questions, a GE spokesman said notifications were sent out on Friday and that GE is reducing staff in response to the economic uncertainty in the U.S. and Europe.

GE, which employs about 6,500 in southeastern Wisconsin, provided few other details.

JP Morgan May Take Over Bank Of America
By 24/7 Wall St.

There is a rumor circulated on Wall St. that JP Morgan (NYSE: JPM) will takeover Bank of America (NYSE: BAC) within the week. The government will support the deal with a $100 billion investment in preferred shares issued by the combined entity. Alternatively, the government may guarantee the value of a large pool of Bank of America assets. The word is that Treasury Secretary Geithner has discussed the transaction with JP Morgan CEO Jamie Dimon.The “merger” would completely destroy the value of BAC’s common shares.

The government feels that the deal may be necessary as Bank of America struggles unsuccessfully to close several transactions to bolster its balance sheet. The Wall Street Journal reported that the financial firm will need to raise $200 billion which would be another possible event that would wipe out common shareholders.

Bank of America’s fortunes have been hurt by events in just the last few days. A New York State judge agreed to allow institutional investors to intervene in an $8.5 billion settlement between the bank and groups that lost money on mortgage-backed securities. China Construction Bank Corp said Bank of American will continue to hold 50% of its share in the foreign financial firm. Many investors hoped Bank of America would sell its entire stake to raise money. Several analysts believe that the costs of owning mortgage firm Countrywide Credit have grown unexpectedly large.

Under federal law, JP Morgan and Bank of America could not combine because together they would have too large a share of several financial markets in the US. Treasury would apparently work with other government agencies to have those rules suspended and then the new combined bank would sell assets to get back into compliance later.

777 School Employees Will Be Let Go, in the Largest Layoff Under
By FERNANDA SANTOS The New York Times

Nearly 780 employees of the New York City Education Department will lose their jobs by October, in the largest layoff at a single agency since Mayor Michael R. Bloomberg took office in 2002.

The layoffs are a direct consequence of budget cuts to schools, which have occurred in each of the last four years, forcing principals to make tough decisions about what and whom to do without. Most of the burden will be shouldered by one labor union, District Council 37, which represents 95 percent of the workers who will be let go.

School aides were saved from layoffs last year by federal money, but 438 — about 5 percent of their ranks — will now lose their jobs. Some 82 parent coordinators, about 6 percent of the total, will also lose their jobs, essentially severing the main link between parents and administrators at dozens of schools.

The budget cuts have also cost 2,186 teachers their full-time, fixed assignments at city schools. Teachers were spared from layoffs, however, because of an agreement brokered in June between the Bloomberg administration and their union, which offered small concessions in exchange for job security for its 200,000 members, including 75,000 teachers.

A spokesman for Mr. Bloomberg, Marc La Vorgna, placed the blame for the layoffs squarely on District Council 37 and the other six unions whose members will also be let go. “The unions involved would not agree to any real savings that could have saved these jobs,” he said in a statement.

Company lays off 100 at Arkansas plant

ARKADELPHIA, Ark. (AP) — An international compressor manufacturer has laid off 100 workers at its Arkadelphia factory because of a seasonal slow-down in the industry.

Danfoss Scroll Technologies said in a statement the layoffs of 60 full-time employees and all temporary workers were effective this past Thursday. Officials said they had to adjust the business in order to secure its long-term success.

Danfoss Scroll general manager Paul Dean told the Arkadelphia Siftings Herald that about 40 temporary workers were affected and about 400 people are still employed.

The statement also said officials have eliminated the factory’s third-shift in production and will operate with one shift in assembly and one in machining.

The company also has implemented productivity improvement efforts to ensure it is price-competitive in the residential air conditioning market.

I am thinking a good many people may be disappointed when the Bernake releases his statement from Jackson’s Hole. I think it will be mostly hot air and no QE-111 launch at this time. I hope I am correct.

U.S. housing faces extra drag - low appraisals
NEW YORK | Wed Aug 24, 2011

(Reuters) - When Sean McGowan signed a contract to buy a New Jersey home in November, he didn’t expect he’d still be living with his parents nearly a year later.

The deal fell through after two appraisals came in tens of thousands of dollars below the contract price, part of a wider trend of differences over property valuations that is compounding the U.S. housing crisis.

“It was very frustrating. We really wanted to move in,” said McGowan, a 31-year-old real estate lawyer.

Many housing experts say low appraisals are yet another headwind for a housing market already suffering from a plunge in prices, high unemployment and tight credit.

Lenders are forced to cap their mortgage loans at the value set by appraisers and buyers and sellers often can’t agree on how to make up the difference with an original deal price.

“It’s hard to talk about any recovery of the housing market and home prices until the appraisal issue is squared away, and that is a broad issue,” said Guy Cecala, publisher of Inside Mortgage Finance, a Maryland-based trade publication.

Sixteen percent of Realtors reported contract cancellations in July, matching June’s level, which was the highest since March 2010, when the National Association of Realtors began collecting data.

Nine percent reported contract delays due to low appraisals, and 13 percent reported a contract was renegotiated to a lower price because an appraisal came in below the original price in the last three months, the NAR said.

Appraisers in the United States have long been used to controversy for their role in the country’s housing market.

The appraisal system has been reformed in recent years to put a stop to the high estimates of property values that even appraisers admit helped inflate the housing bubble.

Many industry watchers argue the new regime has caused the pendulum to swing too far to the other side, inadvertently causing the opposite problem: artificially low appraisals.

“The industry, both from a lending perspective and appraising perspective, has gotten as outrageously conservative now as they were outrageously aggressive a few years ago,” said Rick Sharga, senior vice president of data firm RealtyTrac.

Homeowner Groups Sue to Force Foreclosures
By John Gittelsohn - Aug 24, 2011 Bloomberg

Members of the Vintage East Condominium Association in Miami Beach got tired of waiting for JPMorgan Chase & Co. (JPM) to foreclose on unit 9, so they sued the bank in February to take control of the property.

In June, more than four years after the owner stopped making payments, a judge ruled that JPMorgan lost its claim to the $144,000 mortgage. The apartment is now on the market for $87,500, and the association may stave off insolvency with proceeds from the sale and a new owner who pays monthly dues, said Jane Losson, a board member at the complex. Four of the 11 other owners at the property are also behind on dues.

“I find it an outrage that the bank had decided to do nothing and the other owners got stuck,” Losson, who’s had her Vintage East condo since 2004, said in a telephone interview. “If we get this unit sold, we’ll have a little money.”

Financially troubled condo associations are taking banks to court as foreclosure delays enable delinquent homeowners to stay in their buildings for years, often without paying dues that keep boards running. The groups start by pressuring lenders to speed up home seizures and take over payment of the monthly fees. In extreme situations, like the Vintage East case, associations may force banks to give up rights to the property.

“The lenders are stalling foreclosures,” Ben Solomon, the Miami Beach attorney for the Vintage East association, said in a telephone interview. “Our complaints say the banks abandoned their interest and either need to accept responsibility for the title or walk away.”
‘Mortgage Terminator’

Solomon, whose Association Law Group represented homeowner boards in 16 Florida counties with 15,000 delinquent owners, also won what he calls “mortgage terminator” lawsuits in claims against Bank of America Corp. (BAC), Citigroup Inc. (C), Deutsche Bank AG (DB) and Wells Fargo & Co. (WFC), according to court records.

About 60 million people, or one in five Americans, live in residences with condo or homeowner associations, according to the Community Associations Institute, a trade group in Falls Church, Virginia. States with some of the highest foreclosure rates — Florida, Nevada, California and Arizona — are also among those with the biggest share of populations in homeowner associations, said Frank Rathbun, spokesman for the 30,000- member trade group. The associations maintain residents’ common interests such as parking lots, roofs, landscaping and trash removal.

“About 50 percent of our members said the housing crisis and economic downturn have had a severe or serious impact on their association,” Rathbun said in a telephone interview.

From the Washington Post:

Rick Perry holds the record on executions

“In his nearly 11 years as the state’s chief executive, Perry, now running for the Republican presidential nomination, has overseen more executions than any governor in modern history: 234 and counting. That’s more than the combined total in the next two states —Oklahoma and Virginia —since the death penalty was restored 35 years ago.

He vetoed a bill that would have spared the mentally retarded, and sharply criticized a Supreme Court ruling that juveniles were not eligible for the death penalty. He has found during his tenure only one inmate on Texas’s crowded death row he thought should receive the lesser sentence of life in prison.”

There’s nothing more all-American than executing retards, except perhaps dropping bombs on brown and black people. USA! USA! USA!

Next Stimulus Must Be for the Housing Market: Hays
By Matt Nesto | Breakout

As investors anxiously wait to see whether or not Fed Chairman Ben Bernanke has another rabbit up his sleeve, at least one pro is calling for the next round of stimulus to come from the government rather than the Federal Reserve.

“If you look at the economy, it is slowly coming back, but there is one area - a massive area - that has hit this economy for the last two years, and its housing,” says Don Hays, President and Chief Investment Strategist of Hays Advisory. He wants policymakers to try something new and different that will jump-start the entire economy, not just the banking sector. As much as stimulus has become a much harder sell in Washington, D.C. these days, I think a populist pitch to prop up housing might just catch on.

Hays is particularly fond of a proposal that is being circulated by Ed Yardeni that would make rental income tax-free for a decade to encourage investment into vacant homes. Given the dubious benefits derived from the first few rounds of stimulus and easing, a handout to housing seems at least worth a try.

“We have 2.2 million people in the housing construction industry that are still out of work and cannot get a job so that is the place that has to be stimulated,” Hays says. “We think that is the one area that has not had the same long term encouragement.”

Normally, when economies are rebounding, housing is a locomotive. But this time Hays says it has been a “terrible laggard” that has been left behind. Whether you agree or disagree, the reality is that housing plays an outsized role in our economy and to attempt to repair one without the other just doesn’t make sense.

As Hays sees it, a shot-in-the-arm for housing would lead to knock-on effect for the broader economy, a spiral-effect that would feed on itself for the better. “People feel more optimistic. Banks start lending. Companies start hiring more and it sort of feeds on itself and that’s what we have to have, that stimulus, that fuel, to kick-start the economy.”

Hays is clear in pointing out that this is not an investment idea, but something for Washington, D.C. to consider as a starting pointing at a time of great hunger for fresh solutions. Nothing ventured, nothing gained?

This is a special day on the Blue Skye; The Monarch caterpilar that the first mate brought aboard and fed milkweed leaves is today a butterfly. Watched the wings turn from crumpled tissue to rigid this morning. There haven’t been many of these guys this year. Last year was a devastating season for them. A month from now it will be in Mexico.

Was called Horatio, but turns out to be a Rachael.

Somebody is dumping gold and buying BoA. Looks like the taxpayer has the priviledge to fund another bailout.

Home Prices Decline 5.9% in Second Quarter- Bloomberg

U.S. home prices fell 5.9 percent in the second quarter from a year earlier, the biggest drop since 2009, as foreclosures added to the inventory of properties for sale, according to the Federal Housing Finance Agency.

European Bank Job ‘Bloodbath’ Surpasses 40,000
bloomberg
Gavin Finch and Liam Vaughan, August 24, 2011

UBS AG (UBSN)’s decision to cut 5 percent of its workforce brings to more than 40,000 the number of jobs cut by European banks in the past month as the region’s worsening sovereign debt crisis crimps trading revenue.

UBS, Switzerland’s biggest bank, said yesterday it will eliminate 3,500 jobs, mainly from its investment bank. It follows HSBC Holdings Plc (HSBA), which announced 30,000 cuts on Aug. 1, Barclays Plc (BARC), which is cutting headcount by 3,000, and Royal Bank of Scotland Group Plc (RBS), which is eliminating 2,000 posts. Credit Suisse Group AG (CSGN) announced 2,000 reductions on July 28.

European banks are slashing jobs this year six times faster than their U.S. peers, according to data compiled by Bloomberg, as concerns about the creditworthiness of Italy, Spain and France roil financial markets and reduce income from fixed- income trading, stock and bond underwriting as well as mergers and acquisitions. Financial firms are also cutting costs as regulators force banks to hold more and better quality capital to withstand future shocks.

“It’s a bloodbath, and I expect things to get worse before they get better,” said Jonathan Evans, chairman of executive- search firm Sammons Associates in London. “I cannot see a lot of those who have lost their jobs getting re-employed. Regardless of how good someone is, no one wants to talk about hiring. Life will be very difficult for two or three years.”

A couple of things I heard yesterday:

1. A broker who is primarily focused in the northern Central Valley, CA and who has been selling lender REO noted that in the beginning of the mess, he might have several nicer homes in a newer subdivision to sell. Now most of what he has to sell is pretty crummy (75/25 crummy to decent ratio).

2. To my surprise (no, shock), a regional builder called Atherton Homes is selling homes in Manteca at upwards of $150 per square foot.

http://www.atherton-homes.com/summitcollection.html

I thought maybe these were simply listed prices and actual sales were much lower. However, if you look at Zillow, sale prices are pretty high (and there are quite a few of them).

http://www.zillow.com/homes/manteca,-CA_rb/#/homes/for_sale/Manteca-CA/53148_rid/6m_days/37.837439,-121.215915,37.827525,-121.249861_rect/15_zm/1_rs/1_fr/

Without the Atherton Homes sales data, I would have shrugged my shoulders at the commentary from the broker. However, the new home sales data was new to me and surprising. I’ve said it before and I’ll say it again. It won’t take burning through ALL of the shadow inventory to have housing starts increase, just the higher quality stuff. At that point new homes will have generally less competition, as the crummy foreclosures are not really competition for new homes. If someone wants a new home, they want a new home.

Less supply of quality foreclosures and other supply is the only explanation for the Atherton Homes sales.

OK, flame on…waiting for it.

If you voted for him in ’08 to prove you were not a racist, you have to vote for someone else in ’12 to prove you’re not an idiot. i read this today, and have been chuckling to myself for hours…had to share it.

News for members of the single payer/public option fan club:

Survey: Employers consider ending health coverage

Looks like our nation’s private employers are getting out of the health insurance business. And I’ll betcha money that Uncle Sam will have to pick up the slack.

Well like they used to say at Cheney-Halliburton Inc. : “Bidne$$ is Bidne$$!”

Libya rebels announce $1.7 million bounty for Qaddafi

Libya rebel leader Mustafa Abdel Jalil also said that the National Transitional Council would allow Qaddafi safe passage into exile if he relinquished power.
By Kristen Chick, Correspondent / August 24, 2011 / The Christian Science Monitor.

Mustafa Abdel Jalil, leader of the National Transitional Council (NTC) that has been governing rebel territory from Benghazi, announced Tuesday that anyone who kills or captures Mr. Qaddafi will be pardoned for any past crimes, in an attempt to entice one of his inner circle to give him up. The money had been raised by businessmen, he said.

[Talk about your "compassionate conservative" type leaders:]

Mr. Jalil also said that if Qaddafi renounces his claim to power, the NTC would give him safe passage to any country that would accept him for exile. He said the NTC would allow the Libyan leader to go to a nation that is not a member of the International Criminal Court, which has issued a warrant for Qaddafi’s arrest on charges of crimes against humanity – which in practice would allow Qaddafi to escape ICC trial.

You can rationalize all you want, but it won’t protect you from the downside of irrational exuberance.

MarketWatch dot com
The Tell
The Markets News and Analysis Blog
Don’t read too much into gold’s drop
August 24, 2011, 12:25 PM

If gold was actually in a bubble, has that bubble popped? It’s a question some traders are asking today with gold GC1Z dropping by as much as $97 an ounce, or over 5%, but it’s probably safer not to read too much into the metal’s decline.

Kitco Metals analyst Jon Nadler on Tuesday argued that speculators were turning gold into a risky bet, even as other analysts were chiming in with predictions for gold at $2,000 – or even $3,000 an ounce.

But Austin Kiddle, an analyst at London-based bullion brokers Sharps Pixley, said Wednesday that the current downward movement in gold is “more in line with profit taking than a move out of safe-haven territory,” especially given that next month is a big month for gold as the Indian wedding season begins.

“There will still be buying on the dips that should support gold (in some fashion), and we will be lead by some factors in the next few days (U.S. Jobless data and Jackson Hole) which will give a clearer direction on the price of gold,” he said, but “at the moment, it’s watch and wait.”

-Myra Saefong

Cash-strapped Einstein Moomjy files for Chapter 11
August 24, 2011 BY HUGH R. MORLEY The Record

Einstein Moomjy, the 63-year-old rug store with its flagship showroom in Paramus, has filed for bankruptcy re-organization and cut its operations to the bone in the face of plummeting revenue brought on by the housing slump and recession.

The company, started in 1948 by Iranian and German immigrants, has slimmed its workforce from more than three dozen to just a pair of unpaid employees and members of the Moomjy family who run the company’s three stores, in Paramus, North Plainfield and Whippany, the company’s bankruptcy attorney said.

Daniel M. Stolz, the Millburn-based attorney, said Einstein Moomjy hopes that a bankruptcy sale, expected to take place in late September or early October, at the three stores will enable the company to get back on its feet and continue to operate North Plainfield and Whippany stores. The lease on the Paramus store expires in February, he said, and the company does not expect the landlord to extend it.

“There is hope that these sales would raise enough money to keep the creditors happy and allow the Moomjys to continue in business,” Stolz said.

In Chapter 11 bankruptcy papers filed Aug. 19, Einstein Moomjy reported assets of $2.5 million and liabilities of $4.47 million, about half of that for unpaid rent.

“The economy has been killing them,” said Stolz. “They kept hoping that the economy was going to turn around. They kept waiting and waiting for it [business] to pick up, and it just hasn’t been the case.”

Revenue so far this year is about $921,000, compared to $6.65 million in 2010 and $13.35 million in 2009, court papers show.

BWAHAHAHicHAHAHicHAHAHAHAHicHAHAHic* (DennisN™)

Chavez nationalise$ gold:
Venezuela / August 25, 2011 / The Sydney Morning Herald

CARACAS. Venezuelan President Hugo Chavez has signed into law the official nationalisation of the country’s gold mining industry.

Last week, he announced his intention to nationalise the country’s gold sector in order to stop ”mafias” exploiting Venezuela’s natural resources. Illegal mining makes up 60 per cent of local production in the gold sector.

Obama consults with GE, AMEX execs on job creation
Obama seeks advice from leaders of his jobs council in advance of economics speech August 24, 2011

VINEYARD HAVEN, Mass. (AP) — President Barack Obama is soliciting advice from the co-chairmen of his jobs council on employment boosting initiatives in advance of a major economics address he intends to deliver after Labor Day.

The discussions Wednesday morning with General Electric CEO and chairman Jeffrey Immelt and American Express CEO and chairman Kenneth Chenault focused on increasing engineering graduates and adding construction jobs by making buildings more energy efficient. That from White House spokesman Josh Earnest.

Earnest said the Council on Jobs and Competitiveness will hold meetings Aug. 31 in Portland , Ore., to discuss efforts to add engineers to the workforce. Another meeting Sept. 1 in Dallas will focus on spending on infrastructure projects.

Make no mistake ,if Corporate America/Wall Street doesn’t like something ,it wont get passed . In fact anything that gets passed must benefit them /

The job-givers ,who aren’t really giving jobs ,but they are good at
using that as blackmail ploys . Liars

Tell the public they won’t get jobs unless Corporate America gets
the lions share of benefits and tax breaks . than of course they never deliever . Therefore ,tax breaks should only be given based on giving them after a Corporate America actually gives jobs and it can be
determined that they just didn’t fire a bunch of people just to re-hire them to get the tax break . Also more penalty taxes are in order .

You say this isn’t the American way . What is so American way about what Corporate America /Wall Street has been doing lately .

A Huge Housing Bargain — but Not for You
By Roger Arnold

NEW YORK (RealMoney) — The largest transfer of wealth from the public to private sector is about to begin. The federal government will be bulk-selling the massive portfolio of foreclosed homes now owned by HUD, Fannie Mae and Freddie Mac to private investors — vulture funds.

These homes, which are now the property of the U.S. government, the U.S. taxpayer, U.S. citizens collectively, are going to be sold to private investor conglomerates at extraordinarily large discounts to real value.

You and I will not be allowed to participate. These investors will come from the private-equity and hedge-fund community, Goldman Sachs(GS_) and its derivatives, as well as foreign sovereign wealth funds that can bring a billion dollars or more to each transaction.

In the process, these investors will instantaneously become the largest improved real estate owners and landlords in the world. The U.S. taxpayer will get pennies on the dollar for these homes and then be allowed to rent them back at market rates.

On Wednesday, the Federal Housing Finance Agency (FHFA), the Department of Housing and Urban Development (HUD) and the U.S. Treasury Department issued a Request for Information (RFI) concerning the disposition of the inventory of foreclosed homes owned by the federal government.

An RFI is ostensibly a way for the federal government to get input from the private sector on how to accomplish the goals laid out in the request. But that’s really just a facade, as the RFI was structured by the investors to begin with.

In reality, the RFI is a way for the members of Congress to find out if they can get away with bulk-selling these homes to private companies without incurring the wrath of their constituents, taxpayers and former owners of the properties.

Assuming taxpayers don’t push back, the next step will be to issue a Request for Proposals (RFP). The RFP will be the bid and plan for these homes by investors.

The way to keep taxpayers from pushing back is to structure the RFI so that the real intention, the bulk sales, is masked by feel-good goals, such as stabilizing neighborhoods and increasing the supply of rental properties.

As intended, the mass media are playing their part in classic style. Every major newspaper in the U.S. has run articles discussing the plan as a rental conversion, allowing readers to assume that Fannie, Freddie and HUD will be renting the properties directly to families who need housing. And although there is an allowance for these kinds of rentals, it is a minor political facade to the obvious true goal of bulk-sale privatization of these homes.

The investors in this program have been waiting for this opportunity since the portfolio of homes owned by HUD began to spike in 2007, when foreclosures surged first in the “Rust Belt,” principally Ohio and Michigan.

90-year-old construction firm closing
By PAT KINNEY, pat.kinney@wcfcourier.com |August 24, 2011 1

WATERLOO — A 90-year-old construction company that built many of the buildings of Waterloo’s largest manufacturers and retail centers is closing.

Prairie Construction, the successor to Jens Olesen & Sons Co., one of Waterloo’s oldest construction businesses, is closing effective at the end of next month.

The announcement of the impending closure was made to its employees Friday.

“We had a stockholders meeting Thursday and developed a plan to dissolve the company,” Prairie President Mike Christiason said. “It’s been a pretty difficult economic climate in which to operate for a few years, so we decided this was the best direction for the company.”

Several options were considered.

“It’s a business decision. Not a business failure,” Christiason emphasized. “We will proceed with the work we have under contract and go about closing out the affairs of the company and meeting all the obligations to our clients currently under contract.”

That includes two high-profile downtown Waterloo projects: the Public Market building at the RiverLoop Expo plaza, and Riverfront Renaissance work on the west bank of the Cedar River between US Bank and the Waterloo Center for Arts.

“Most of our projects will be completed by the end of September,” Christiason said, when a company equipment and inventory auction is scheduled.

The company currently employs about 25 people. Prairie officials will do what they can to help them find other work, Christiason said.

Judging from how many of gold’s “worst days” have occurred in the wake of the onset of the financial panic, it seems likely gold has further upside potential from here until the panic eventually subsides.

Marketwatch dot com
Gold’s 10 worst days
August 24, 2011, 11:05 AM

Gold futures are falling sharply Wednesday, with the precious metal losing $86.30, or 4.6%, to trade at $1,775.50 an ounce on the Comex division of the New York Mercantile Exchange.

Analysts said the metal’s failure to top $1,900 an ounce appears to have marked a near term top given gold’s steady rally all year.

Still Wednesday’s sharp decline is a candidate for one of the metal’s worst days ever, in percentage losses.

The 10 worst days for gold, according to data compiled from FactSet Research:
-7.30 6/13/2006
-5.83 3/19/2008
-5.51 8/05/1993
-5.37 5/24/2006
-5.15 12/01/2008
-4.85 10/02/2008
-4.83 10/24/1997
-4.41 2/04/2010
-4.27 10/22/2008
-4.23 8/11/2008
-4.11 10/16/2008
-4.01 12/04/2009

-Tom Bemis

“Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth”.

– John Maynard Keynes – The Economic Consequences of the Peace

Ritz Interactive files for Chapter 11
Los Angeles Business from bizjournals

Ritz Interactive , the Irvine-based parent of Internet retailers RitzCamera.com, WolfCamera.com and BoatersWorld.com, has filed for Chapter 11 bankruptcy protection.

According to the Orange County Register, the company had $2.4 million in sales in 1999, its first year of operations, and grew to $111 million in sales in 2007. But the company began to experience a revenue downturn in the second half of 2008 due to the U.S. economic recession.

In February 2009, Ritz’ primary supplier at the time, Ritz Camera Centers, filed for Chapter 11 bankruptcy, which hurt inventory availability, the Register reported, citing Ritz’ bankruptcy filing last Friday. Then camera manufacturer Canon U.S.A. Inc., whose product historically accounted for more than 15 percent of Ritz’ sales, refused to do business with Ritz after having lost significant funds in connection with the Ritz Camera Centers’ bankruptcy, the filing said.

In addition, Ritz Camera Centers liquidated its Boaters World stores and warehouse, and as a result, the Ritz lost its main supplier for Boatersworld.com, which in 2008 accounted for 13 percent of its sales.

All these factors caused Ritz to report operating losses in 2009, 2010 and year-to-date 2011, according to the filing.

Henry Blodget vs. Bank of America: “Rotted to the Core”
By Aaron Task | Daily Ticker –

A major controversy has erupted in the blogosphere over the value of Bank of America’s balance sheet, and whether the bank will be forced to raise capital in the near future.

At the center of the debate is my colleague Henry Blodget, who touched off a maelstrom Tuesday with a blog that concluded Bank of America might need to raise up to $200 billion in capital.

“The trouble is that the market doesn’t believe Bank of America’s assets are worth anything close to what Bank of America says they are worth,” Henry writes, citing the following items other observers think should or will be subtracted from the bank’s $222 billion of book value:

$15-$20 billion in Increased mortgage-litigation reserves. Zero Hedge thinks BOFA is understating the liability for mortgage litigation costs by this amount. See explanation here.
Some percentage of $80 billion of “second mortgages.” Yves Smith thinks these should probably be written down by 60%, or $48 billion. You can pick your own number.
Some percentage of $47 billion in commercial real estate loans.* The “extend and pretend” game in commercial real-estate is even more pronounced than in residential real estate. So as Yves Smith observes, there’s almost no chance those loans are actually worth $47 billion. (UPDATE: Our original post said BOFA’s CRE exposure was $182 billion, which was a number cited by Yves Smith. BOFA said this number was off “by a factor of 4.” Yves has since rechecked the filings and realized that she made a mistake. I apologize for relaying it.)
A healthy percentage of $78 billion of “goodwill.” Bank of America built itself by acquisition. “Goodwill” is what’s left over when management overpays for something. As Yves Smith observes, Bank of America’s former CEO Ken Lewis loved overpaying for things. He overpaid for Countrywide, for example, which has since been written off to zero, and Merrill Lynch, which he could have had for free by waiting a couple more days.
Untold amounts of exposure to collapsing European banks and sovereign debt.* Yves Smith says Bank of America says its European exposure is $17 billion. (UPDATE: Bank of America issued a statement clarifying that its “sovereign” exposure–to the debt of PIIGS countries–is $1.7 billion. The overall European exposure is $17 billion. But the big concern here is not just sovereign exposure–debt of countries–but bank exposure. Along with the associated derivatives.) Really? Has the firm not written any credit default swaps protecting customers in the event that European banks or countries go belly up? Might the firm have to post some cash “collateral” to satisfy these contracts? That’s what Lehman had to do, after all. And that’s what made Lehman go from “having plenty of capital” to being broke overnight.

“The market also doesn’t believe that Bank of America has reserved anywhere near enough to pay the costs of litigation surrounding its mortgage behavior during the housing boom,” for which it has already paid $13 billion in settlements, Henry added.

Bank of America’s response was quick and ruthless: “Mr. Blodget is making ‘exaggerated and unwarranted claims’ which is what the SEC stated publicly when he was permanently banned from the securities industry in 2003,” the bank declared.

vive la différence!

Sacre Bleu! Wealthy French Push for Higher Taxes, Warren Buffett Smiles

By Aaron Task | Daily Ticker – 3 hours ago

“It’s a sign of just how fast the political-economic climate is changing and also how much underlying social tensions there are, not just in the U.S.,” Tett says. “If there’s going to be a question of finite resources and allocating pain, there could be quite a nasty backlash against the rich.”

The top income tax rate in France is 40% and French citizens pay a 19.6% VAT sales tax, yet some of the country’s wealthiest individuals say they want to pay more.

“At a time when the government is asking everyone to show solidarity, we feel we must contribute,” 16 of the nation’s wealthiest individuals declared in an open letter published on the website of weekly magazine Le Nouvel Observateur.

My realtor was given the option of full-time exclusive agent for a luxury (yes, it’s really freakin’ luxurious) Gulf-front condo building, but he’d have to quit his $43k/yr teaching job.

He declined the listing.

Steve Jobs resigns as Apple CEO (finally!). Gold drops $100 and latest polls has Perry surging over Obama for 2012.
So long and thanks for all thee fish.

GlenBeckinstan Speaketh!

Glenn Beck boasts ‘courage’ at Israel rally:
By Joe Pompeo | The Cutline 8/24/2011

Israeli religious and political figures both on the left and right came out against the rally, presumably as a reaction to Beck’s track record of controversial remarks. There was even a Facebook page called “Glenn Beck Stay Home” created in protest.

But in the end, 1,700 supporters showed for the sold-out event, and an additional 3,000 gathered at a nearby viewing station where it was beamed in live, a spokesman for Beck told The Cutline. The Guardian, among others, contested those figures, reporting a “surprising number of empty seats belied the organisers’ claims that demand for tickets had outstripped availability.” Many of the attendees were evangelical Christians from the United States, according to reports.

“In Israel, there is more courage in one square mile than in all of Europe,” Beck said in his keynote address. The event, titled “Restoring Courage,” was billed as a rally to declare support for the Jewish state.

“In Israel,” Beck continued, “there is more courage in one soldier than in the combined and cold hearts of every bureaucrat at the United Nations. No country is perfect. But it tries, and it is courageous. Today, the world needs courage more than ever.”

Completely off topic for the AZ crowd. We live between Surprise and Wickenburg on 2.5 acres in the desert. We have rescue dogs, one of which is a bloodhound found lost in the desert by my wife. A great dog, as this is her property and anything that comes close sets her off. So, this am while getting ready for work I hear her high pitched howl which I heard once before when she located a rattlesnake in the back. Since we have a new puppy, the last thing we need is a snake bite (all the dogs get vaccinated for rattlesnake just in case). Turns out she had targeted a scorpion the size of my fist and was keeping a safe distance while sounding the alert. I am glad she was brought into our life! Besides that, she is just plain cute. Just another day in the desert.

Just wanted to thank everyone who stepped forward to offer their support today. Yes, I know. I made a dumb mistake and bought life insurance that I don’t need. Or want.

I’m going to be seeing my attorney tomorrow afternoon to find out what my legal rights are. So, if you don’t see much verbiage from me tomorrow, it’ll be because I’m getting ready for the attorney meeting — and taking part in it.

Thanks again to this wonderful community!

The CME agrees with my humble opinion that gold has entered a parabolic bubble price blowout phase. Once prices have gone quasi-exponential, watch out below, folks!

CME raises gold margin requirements again
August 24, 2011, 5:17 PM

For the second time this month, the CME Group Inc., the parent company of the main metals and energy exchanges in the U.S., announced late Wednesday an increase in margin requirements to trade gold. It raised the amount of money needed to trade gold contracts by 27% to $9,450 per 100-ounce contract.

The move comes on the heels of a $104-an-ounce drop in gold futures prices, which some analysts had blamed partly on speculation that the CME would raise margin requirement again.

Gold’s approach to $2,000 an ounce “invited excess speculation and therefore margin concerns for exchanges,” said Richard Hastings, a macro strategist at Global Hunter Securities. “The quasi-exponential price behavior was dangerous and the exchanges today view this with significant concern — and act quickly.”
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