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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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Moody’s downgrades 8 Greek banks
By ELENA BECATOROS The Associated Press
Updated: 6:11 a.m. Friday, Sept. 23, 2011
Posted: 3:04 a.m. Friday, Sept. 23, 2011
ATHENS, Greece — Moody’s ratings agency downgraded eight Greek banks by two notches Friday due to their exposure to Greek government bonds and the deteriorating economic situation in the country, whose government has struggled to meet the terms of an international bailout.
Moody’s Investors Service downgraded National Bank of Greece, EFG Eurobank Ergasias, Alpha Bank, Piraeus Bank, Agricultural Bank of Greece and Attica Bank to CAA2 from B3. It also downgraded Emporiki Bank of Greece — which is majority owned by French bank Credit Agricole — and General Bank of Greece — majority owned by another French bank, Societe Generale — to B3 from B1.
The agency said the outlook for all the banks’ long-term deposit and debt ratings was negative.
Moody’s cited “the expected impact of the deteriorating domestic economic environment on non-performing loans” and “declines in deposit bases and still fragile liquidity positions” in its reasoning for the downgrade.
Greece has been kept solvent by a euro110 billion ($149 billion) bailout in 2010 from other eurozone countries and the International Monetary Fund. But it has needed another massive bailout this summer, and has angered international creditors by lagging behind in its commitments to implementing reforms and carrying out pledges
Greece needs an euro8 billion ($11 billion) bailout installment by mid-October to keep from defaulting on its massive debts as it moves into a fourth year of recession. To get the money, the government this week announced another round of tax hikes and pension cuts, angering an already austerity-weary public.
Metro, tram and train workers in Athens went on strike Friday, while all public transport workers and taxi drivers are to hold a 48-hour strike next week. However, an Athens court ruled a 24-hour air traffic controllers’ strike set for Sunday was illegal, meaning flights will operate normally over the weekend.
A nationwide general strike is set for Oct. 19.
Creditors increasingly angry. Public increasingly austerity-weary. Government increasingly raping the public to apease the Creditors. Public increasingly not cooperating.
Interesting feedback loop!
I find the never-ending news of imminent Greek default makes it ever more challenging to stay focused on the U.S. housing situation.
Kudos to Ben for keeping the HBB on topic!
Greece on Edge of Insolvency 24 Centuries After City Default
By Simon Kennedy and Maria Petrakis - Sep 23, 2011 8:20 AM PT
A Greek flag is reflected in glass broken during previous protests in Athens on September 20, 2011. Photographer: Louisa Gouliamaki/AFP/Getty Images
George Papandreou, prime minister of Greece, says throwing in the towel now would be a “catastrophe.” Photographer: Jock Fistick/Bloomberg
History’s first sovereign default came in the 4th century BC, committed by 10 Greek municipalities. There was one creditor: the temple of Delos, Apollo’s mythical birthplace.
Twenty-four centuries later, Greece is at the edge of the biggest sovereign default and policy makers are worried about global shock waves of an insolvency by a government with 353 billion euros ($483 billion) of debt — five times the size of Argentina’s $95 billion default in 2001.
…
Recession’s second act would be worse than the first
By John W. Schoen, Senior Producer - MSNBC
Fresh evidence of a global economic slowdown has raised fears that governments around the world may be powerless to reverse it. If the world does fall into back into recession, it could be much harder to escape than the contraction that ended in 2009.
With banks still recovering from a decade-long credit bubble, governments slashing spending to cope with unsustainable debt, and unemployment at levels not seen in decades, a new recession would be “disastrous,” according to Roger Altman, a senior Treasury official in the Clinton administration.
“We could be in for a repeat of the experience of 1937, when America fell back into recession after three years of recovery from the Great Depression,” he wrote in the Financial Times.
Altman was referring to the fact the global downturn of the 1930s technically included two U.S. recessions, from 1929 to 1933 and again from 1937 to 1938. U.S. unemployment peaked at over 20 percent in the 1930s, according to historical estimates, and did not decline significantly until factories began gearing up for World War II.
Two years after the latest U.S. recession technically ended, evidence continues to build that the weak recovery is stalling out. The U.S. economy stopped producing new jobs in August after a string of mostly meager monthly job gains that failed to bring the unemployment rate below 9 percent.
On Thursday, fresh data showed the Eurozone’s service sector contracting for the first time in two years; a separate index of the manufacturing sector, which has provided much of the region’s growth, slowed for the second month in a row.
A global stock sell-off that dragged market indices to their lowest level of the year spread to the U.S., where the Dow Jones industrial average was down nearly 400 points.
Until recently, there were hopes that emerging economies in places like China and Brazil could prop up global growth until a stronger recovery took hold elsewhere. But China’s two biggest export markets — Europe and the United States — are struggling, and that has cut into demand for Chinese goods. A report out Thursday showed that China’s factories slowed for the third month in a row.
“There is a global slowdown,” Jeavon Lolay, head of global research at Lloyds Banking Group, told Reuters. “There is no doubt the risks of a global recession have grown.”
That’s also the opinion of Federal Reserve policymakers, who said Wednesday they saw “significant downside risks” to the U.S. economy after deciding to launch an unusual program of reshuffling $400 billion in Treasury holdings to try to push interest rates lower.
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But with interest rates already at record lows, few expect the program to do much to increase the demand for loans. Businesses face weak demand for their products and services and consumers are continuing to work to pay down their debts. Though mortgage rates remain at record lows, millions of homeowners are unable to refinance their higher rate loans because they owe more than their home is worth.
Some analysts argue that the Fed’s latest move (dubbed Operation Twist because it “twists” the relationship between short- and long-term rates), will hurt economic growth because it will squeeze bank profits and lower the income consumers earn on their savings. Public and private pension funds, already under strain, will be even more badly underfunded because they’ll have to set aside more money to generate the same amount of cash to pay retiree benefits.
“Public an private pension funds, already under strain, will be even more badly underfunded because they’ll have to set aside more money to generate the same amount of cash to pay retiree benifits.”
But they won’t or can’t set aside more money, so retiree benifits are destined to be cut.
Baked in the cake.
Baked in the cake AND no longer a surprise.
“…AND no longer a surprise.”
It’s hard to fathom in this Information Age but I work with a lot of people who do not have a clue as to what is about to come their way financial wise.
Some people just do not get it. These people have been conditioned by decades of dips and recoveries, dips and recoveries - and anything else is well beyond their imagination.
Denial.
I had a conversation once w/the head nurse at my surgeon’s office. I insisted on a biopsy of the effected area after we tried some relatively expiramental treatments. She was surprised by how strongly I felt. She said most people would be happy to leave the office having no idea and telling themselves everything was fine w/o any evidence to support that.
She said most people.
She then went on to tell me how she had to have a knock down drag out verbal argument w/her husband who she considered a strongly composed individual when he was having symptoms. Without her extreme insistence he wouldn’t have seen the doctor. Of course she understood her craft. He did have cancer. Without her his fight would have been more difficult. His prognosis more risky.
I thought about the public’s reaction to the global banking crisis as she spoke. Felt the analogy was strong.
About twenty years ago, I had a basal cell carcinoma removed from under my left eye. The dermatologist who first examined it was quite certain it was benign, but I insisted on the biopsy that confirmed it was a tumor.
Flock of Segals
Squatter Nation: 5 years with no mortgage payment
By Les Christie June 12, 2011: 9:23 PM ET
NEW YORK (CNNMoney) — Charles and Jill Segal have not made a mortgage payment in nearly five years — but they continue to live in their five-bedroom West Palm Beach, Fla. home.
The Segals have been doing that — in court. They bought their home in 2003 with an adjustable rate mortgage. After a few years, their monthly payments tripled to $3,000, just as their home-inspection business was cratering.
The Segals want the bank to modify the mortgage so payments are affordable, and they think the court will agree that their lender put them into a toxic loan.
“The evidence will show that we were defrauded,” said Jill Segal.
(I already showed these victims pulled out 100s of thousands of $ b4 crying foul.)
http://money.cnn.com/2011/06/09/real_estate/foreclosure_squatter/index.htm - 62k -
I blame the local county assessors for the slow-down in the foreclosure process. Used to be a smooth process of selling the place on the courthouse steps to a new tax-paying owner. The bank could even buy it if they felt incline to pay the taxes, but either way, the property tax revenue was restored.
Used to be a smooth process of selling the place on the courthouse steps to a new tax-paying owner.
Them thar legal title signatures look like they been $liced & Diced. Who wants to oblige themselves to a $250,000+ loan based on that. Then again, eyes reckon they could just pay ca$h for a “As IS” rapid trans$action and see what follows.
(brings back memories of the Iran Gov’t having hundreds of women piece back together all those US Embassy documents that were shredded. Hwy wonders what message Daffy & Foghorn would have re-assembled: “Wabbit Season!”)
A quick lien sale with a five-day ad in a newspaper legal column would take care of the title issue. Next!
Perhaps, perhaps, might also depend$ on how good the lawyerin’ is.
($ometimes your $ignature on legal doc’s , is might like a rope around yer neck.)
BofA really needs your expert help, might be lucrative for you.
Any thoughts on what sort of investment strategies are likely to do well in the brave new world of Operation Twist? So far, the entire investing landscape seems pretty wobbly, but I assume this is just a temporary adjustment, right?
Before the Bell
Index Futures:
S&P 500 1,113.00 -10.50 -0.93%
DOW 10,559 -91.00 -0.85%
NASDAQ 2,154 -21.00 -0.97%
Wall Street looking wobbly
U.S. stock market futures pushing lower amid a volatile session in Europe and jitters ahead of weekend G-20, IMF, World Bank meetings.
Sept. 23, 2011, 7:30 a.m. EDT
Stock futures sink, point to weaker Wall St.
All eyes on Washington as international policy makers gather
By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — U.S. stock index futures erased small, early gains Friday to point to a lower start for Wall Street as investors looked to international policy makers for solutions to Europe’s debt crisis a day after worries over world growth prospects triggered a global equity rout.
…
Canned peas and AK-47’s?
Are Treasurys the clear winner over gold under Operation Twist, or is this just a temporary aberration?
P.S. The 100bps+ gap between the 10-year and 30-year Treasury yields suggests bond traders are pricing in a decade of economic gloom to come.
Sept. 23, 2011, 7:09 a.m. EDT
Gold off over $30 as commodities pressure builds
MADRID (MarketWatch) — Selling of precious and base metals picked up the pace in afternoon European trading hours on Friday, after heavy losses in the prior session. Gold futures for December delivery (GC1Z -2.57%) fell $34.50 , or 2%, to $1,708 an ounce in electronic trading after settling around $1,741.70 on Thursday. Losses came as the dollar turned higher.
…
Bonds twist after Operation Twist
By Maureen Farrell September 21, 2011: 4:57 PM ET
10-Year Treasury yields fall to all-time lows on Fed’s announcement of Operation Twist.
NEW YORK (CNNMoney) — Bonds contorted further after the Federal Reserve officially announced a plan to buy long-term Treasuries and sell short-term securities Wednesday, a program being dubbed Operation Twist by the market.
The Fed hopes that Operation Twist will lower long-term interest rates broadly. The central bank will purchase $400 billion of Treasuries with maturities between 6 and 30 years before the end of June 2012 and will sell the same amount with maturities of 3 years or less.
Bond investors immediately acquiesced, pushing prices of long-term Treasuries up and yields down. The 10-year Treasury yield hit a record low of 1.858% while 30-year Treasury yields dropped to 3.01%.
…
Not that I think what the Fed is doing has much control over the economy, I take this as a signal they think we are going to be in deflation for at least 10 years. Parasites.
They restacked the deck chairs on the Titanic. The question is, how would anyone who wants to get onto a life raft before there is no space left manage to do so?
Who’d've thunk folks would willingly trade The Precious™ for “worthless paper”?
Heavy selling grounds gold
Gold futures slide under $1,700 an ounce, picking up from Thursday’s selloff as turmoil in global markets continues and investors sell metals positions to raise cash ahead of the weekend.
Following oil down
At least the stock market is hanging in there today.
BTW, what is this “cash” stuff they are talking of, and why do investors need to raise it before the weekend?
Gold down $100/oz.
Gold futures slide under $1,700 an ounce, picking up from Thursday’s selloff as turmoil in global markets continues and investors sell metals positions to raise cash ahead of the weekend.
Too many shoeshine boy signals to document them all…
Hulbert Financial Files Archives
Sept. 23, 2011, 2:34 p.m. EDT
A gold bubble? Perhaps not
Gold’s rise, and recent fall, have been fast and furious, but Mark Hulbert thinks warnings of a gold bubble are premature. Plus, the so-called “Fed Model” is popular with Wall Street, and usually wrong.
What’s gonna be the next special (”it’s different, because…”) asset class now that gold is toast?
Market Rout Claims New Victim: Metals
The selling that has washed over financial markets in recent weeks swamped precious metals, sending gold and silver plummeting and raising the stakes for weekend meetings of global finance officials.
MARKETS
SEPTEMBER 24, 2011
Market Rout Claims New Victim
Investors Dump Gold, Silver to Pay for Losses; All Eyes on IMF This Weekend
By LIAM PLEVEN, JONATHAN CHENG and TOM LAURICELLA
The wave of selling that has washed over financial markets in recent weeks swamped precious metals on Friday, sending gold and silver prices plummeting and raising the stakes for key weekend meetings of global finance officials.
Gold and silver prices have seen sharp declines lately, but Barron’s economics editor Gene Epstein says the long-term value of the commodities still shines.
In the past week, the Dow Jones Industrial Average plunged 6.4%, its worst week since October 2008. Currencies, too, have had a wild ride. The dollar this month has soared against its rivals. The euro has tumbled 6% in September, while emerging currencies like Brazil’s real have been punished.
Gold futures dropped 5.8% Friday, the biggest one-day loss in five years, as investors rushed to cash out of some of their most profitable investments in the hopes of making up for losses elsewhere. The decline capped gold’s worst week since 1983. Silver was even harder hit, plunging 18% for its largest single-day decline since 1987.
Precious metals posted deep losses as investors continued to leave the market in favor of cash. Comex silver for September delivery dropped $6.4870, the worst dollar-decline since 1980. Liam Denning has details on The News Hub.
The week highlighted a growing sense of despondency among investors concerned that policy makers have neither the will nor power to juice their economies.
The broad market declines have added pressure on finance ministers and central bankers as they gather for the International Monetary Fund’s annual meeting in Washington this weekend.
“We are in a red zone,” said World Trade Organization chief Pascal Lamy, one of many officials attending the meeting. “We are at risk of repeating what happened in 2008″—when market upheaval shook the global economy—”occurring again for different reasons but through the same channel, the financial system.”
Friday’s exodus from gold and silver underscores the unpredictable and volatile nature of financial markets in recent weeks.
Investors have grown increasingly skeptical of policy makers’ ability to revive the global economy, and of their willingness to bring about a resolution to the European debt crisis.
The broader rout has left many investors with unexpected losses, driving some to part with some of their better performing investments, among them gold and silver.
The declines are a turnabout for gold, in particular, which has recently found strong demand in good times and bad. It has enjoyed a special status as a safe haven from financial crisis and political turmoil, as well as a hedge against inflation.
Gold has risen six-fold in the past decade, including a 15% gain this year. In August, it reached a nominal record of $1,888.70 per troy ounce, rising on a trajectory that many had speculated could not last.
…
Does the theory that gold will keep going up forever hold any water, whatever, in the bizarro world of Operation Twist?
Gold can serve as an economic indicator too
September 22, 2011, 3:51 PM
Forget about copper — maybe gold offers a better indication on the state of economic health.
“While industrial commodities have fallen due to the anticipated declines in global growth, the rising gold price demonstrates gold’s monetary attributes,” said Nick Barisheff, president and chief executive officer of Bullion Management Group Inc. “It is these monetary attributes which propel gold above other commodities as an indicator of global economic wealth.”
…
Gold “acts as a real-time gauge to the financial wellbeing of an economy,” Barisheff said. “Gold, in its eleventh-straight year of gains, is the anti currency. Governments cannot control it; they cannot print more of it. Gold is the mirror image of a country’s economic performance.”
“It is clear that fiscal and monetary responsibility is nowhere to be seen in the foreseeable future. Japan and Europe are facing similar economic crises,” he said. “As such, currencies will continue to fall, inflation will continue to grow and gold will continue to rise as it simply reflects the reality of the financial situation we are in.”
- Myra Saefong
If gold fever fails to satisfy, is there any bubble left unblown to entertain speculators next?
‘Needs’ industries. Pick a need, any need. Oil, wheat, pork, water, rare-earth elements, and painkillers.
I think gold is a dumb money trap
Just my 2$
I agree.
Just my two buckaroos.
Suppose you were one of those hapless retirees who used to count on interest earnings on your CDs for income. Recent declines in interest rates severely crimped your returns. Now Operation Twist promises to crimp them still further.
Where should a retiree depending on interest income turn for income to pay living expenses under Operation Twist?
Good topic suggestion. There is hardly anything available for a decent return. CDs are gone for a long time. BB put them to rest. Stock market is a casino now. GOld/metals are in a high bubble. BRICs are falling in their stocks. Where should a person put money? I know one place: The savings bank accounts in India or Brazil. The interest rates are 11% with zero risk.
It seems like there were no places for cautious long-term savers / investors to hide before Operation Twist, and now the investing landscape is even more of a mine field.
Zero risk?
LOL. Yeah, that is pretty funny.
There are too many shoeshine boy indicators for gold going off right at the moment to keep track of them all…
The savings bank accounts in India or Brazil. The interest rates are 11% with zero risk.”
Export inflation from dying economies to younger economies. I think Brazil is putting laws in place to protect itself from hot money.
Japan did this to the USA a few years ago. One reason for the mad inflation of homes. And how did that end?
How so zero risk?
“Suppose you were one of those hapless retirees who used to count on interest earnings on hour CDs for income.”
Then you are hosed. And this is the very argument I make when trying to disuade some of the folks I work with not to retire - especially not to retire early.
But my arguments are countered by the arguments of sharks that run retirement seminars who promise retirement lemmings ten-plus-percent returns on their retirement funds (cashed-out pensions, 401Ks, ROTHS, etc.), and these promised returns are AFTER the sharks subtract hefty fees for handling the lemmings’ money.
A job is a terrible thing to waste, IMO, especially in a deflating global economy.
But my arguments are countered by the arguments of sharks that run retirement seminars who promise retirement lemmings ten-plus-percent returns on their retirement funds (cashed-out pensions, 401Ks, ROTHS, etc.), and these promised returns are AFTER the sharks subtract hefty fees for handling the lemmings’ money.
I don’t know how many of you are also Bogleheads, but one of the house rules that we follow is being wary of anyone who’s trying to sell us something. Sharks running retirement seminars fall into this category.
It is obvious that we have passed from an era where every “investment” seemed to give a pretty decent return to one in which simply preserving capital is challenging. It is the end of the biggest credit expansion in history. Interest rates are low simply because we are in deflation. If you want to borrow money though, interest rates don’t matter because you can’t get a loan. If you want a loan that by itself makes you a bad risk.
What will we do? We will consider the money that we do have very valuable. We will spend it as though it is irreplacable. We’ll do with less. Life will still be good, unless you’re in debt. Welcome to the world of our grandparents and great grandparents.
+ 1.
Welcome to the world of our grandparents and great grandparents.
($urvival $kills, like endurance, are often under-rated by the hare-rabbit, but not the Tortoise.)
“It’s different this time”,…”This too will pass”,…”Hey, cut with the negative wave$ Kelly! America, it ain’t going nowhere, ’till we fix the flat!”…
1920-1939
1920 The economy nosedives. Farm bankruptcies skyrocket as the “Golden Age” of agriculture ends. Famous names, including General Motors, withdraw from the tractor field. The FTC accuses implement makers of price-fixing.
1921 Bad times continue. As business shrinks, extensive layoffs follow. Waterloo Boy tractor sales plummet incredibly, to 79 from 5,045 the previous year. Wages of those still working are cut at least 10 percent.
1922 Ford Motor Company again cuts tractor prices drastically, as it had in 1921, to attract business during hard times. This time the strategy pays off; Fordson tractor output jumps to almost 67,000 in 1922 from 35,000 in 1921.
1923 Deere launches the Model “D”. A success from the start and the first two-cylinder Waterloo-built tractor to bear the John Deere name, it would stay in the product line for 30 years.
1924 International Harvester introduces the Farmall, a breakthrough in tractor technology. Its design—rear wheels wide apart, front wheels close together—permits tractor cultivation of row crops. By decade’s end, IH builds almost 60 percent of farm tractors.
1925 Design begins on the “GP” (for General Purpose) Tractor, the Deere answer to the Farmall.
1926 Farm surpluses in the 1920s increasingly become an issue. In Detroit, Henry Ford institutes an eight-hour day and five-day work week at his factories.
1927 The company produces a combine, the John Deere No. 2. A year later, catalogs advertise the John Deere No. 1, a smaller, more popular machine. By 1929, the No. 1 and No. 2 are replaced by newer, lighter-weight versions.
1928 William Butterworth is elected President of the US Chamber of Commerce. Primary company managerial authority passes to Charles Deere Wiman.
1929 The “GP” Wide-Tread, a row-crop tractor, enters the market. It is the first Deere tractor with a tricycle front to fit between two crop rows, and rear axle wide enough so wheels can straddle two rows.
1930 Consolidations leave only seven full-line farm equipment companies: John Deere, IH, Case, Oliver, Allis-Chalmers, Minneapolis-Moline, and Massey-Harris. Deere and IH dominate most product categories.
1931 A $1.2 million embezzlement at People’s Savings Bank in Moline, Illinois — “Deere’s bank” — threatens closure and loss of employee savings. The company writes a check to cover the loss. The bank survives.
1932 The Great Depression hardens, forcing massive layoffs, pay and pension cuts, shortened hours, and a temporary end to paid vacations. A 1920s savings innovation, the Thrift Plan, eases the burden for some employees. John Deere continues group insurance for the unemployed, lowers rent in company housing, and starts “make work” projects.
1933 Business is almost at a standstill. Sales plunge to $8.7 million. Though it is losing money, the company decides to carry debtor farmers as long as necessary, greater strengthening farmer loyalty.
1934 Despite the Depression, the company emphasizes product development. The Model “A” Tractor enters production. A similar but smaller Model “B” follows in 1935. They become the most popular tractors in the company’s history, remaining in the product line until 1952.
1935 John Deere, strong in wheeled tractors, and Caterpillar, dominant in tracked tractors, join forces to sell each other’s products, especially in California. Strong at first, the link weakens with time, breaking finally in the mid-1960s.
1936 The Agricultural Adjustment Act and other New Deal farm legislation helps farmers recover from Depression effects. Farm-equipment sales bounce back from their lows.
1937 At the beginning of the decade, only 13 percent of farms have electricity. By decade’s end, after passage of the Rural Electrification Act, the total rises to 33 percent. Not until the 1960s would virtually all farms have electricity.
1938 Industrial designer Henry Dreyfuss, working with Deere engineers, streamlines the “A” and “B” Tractors. Henceforth, concern for attractive design joins traditional utilitarian values as hallmarks of John Deere products.
1939 WWII begins. Model “L” Series Tractors, built at Wagon Works in Moline, 1936 to 1946, enjoy an enormous boost in sales after Henry Dreyfuss’ styling.
[Disclosure: Some of Hwy's Amish cousins use Deere equipment, $elf-modified,... they are pulled by mules & horses, works great!]
“Where should a hapless retiree depending on interest income turn for income to pay living expenses under Operation Twist?”
Come on, this isn’t about saving a hapless retiree or anyone else! This is about where the Government is going to grab another dollar to keep the game going until things turn around. Those in power don’t have a picture of what’s happening. They just want to see a turn in the economy and will deal with the aftermath later. So, come on down retirees and put your money into the stock market so your Uncle Sam can have quick permanent and easy access to your money.
operation twist….keep housing prices up by giving everyone 4% no 3% no 2% no wait lets do it right 0% interest for 30 years….. thataaah work
Make it 100 years and I’m in.
So, come on down retirees and put your money into the stock market so your Uncle Sam can have quick permanent and easy access to your money.
Is that your game show analogy of what the Republicans perpetually advocate for the “evil” $ocial $ecurity $ystem? Let’s take a $trawman vote of the effected $eniors:
Privatize, then de-regulated, then rapid-as-po$$ibe eliminate $ocial $ecurity,… say Aye!
Tweak and adjust the $tatus Quo,…now, come on there has to be a least x1 voter in favor of this approach…anyone?
Retirees lose twice - again in the future - when they have to sell these bonds at a steep discount due to inflation (much higher interest rates).
You cannot print the money so far printed without affecting future interest rates upward pressure.
Operation Twist is just a method of the gov trying to lock in cheap rates for another 20 years. They cannot afford higher rates.
QE1 and 2 were for the benefit of the banks to help liquidity. Twist is to help the gov.
They don’t expect retirees to live for ever and expect that the estate benefactors will be happy to get whatever !
Good to know that Operation Twist was last executed during the Kennedy administration (pre-1963), almost twenty years before thirty-year Treasury yields spiked to 14% or so. Further, the U.S. stock market peaked around 1966 in price-earnings terms and didn’t bottom out until around 1982.
Are we once again in a bear market now?
100*(10,597.14-12,876.00)/12,876.00 = -17.7% off the Dow’s 52 week high — not quite a bear, just yet, by the customary 20% down standard…
Dow Jones Industrial Average
Market closed 10,733.83
Change -391.01 -3.51%
Volume 306.17m
Sep 22, 2011, 4:30 p.m.
Previous close 11,124.84
Day low 10,597.14
Day high 11,122.12
Open: 11,121.89
52 week low 10,597.14
52 week high 12,876.00
It will be a perfect 20% by COB today. Futures are already down by 150.
Darnit, I seem to remember predicting that this country would go to pot in Summer 2011. It’s the only time they could allow it to happen and still have time for a “turnaround” before the 2012 elections. Fannie’s 6% –> 4% will probably go nowhere and Op Twist is not enough liquidity and too hard for people to understand anyway. I suspect that somebody shut off the spigot, which is why BoA is rushing to the exits and why the stock market is reverting to goods and services.
I suspect that somebody shut off the spigot
China’s been escalating their threats since Ben’s had this blog. Maybe they’ve finally made a move that supports the idea they finally mean it and we’ve moved beyond the saber rattling.
Here’s one spigot turnoff.
“My greatest concern is the French Banks SocGen, Agricole and BNP Paribas. A wholesale funding run on these three is like a run on JPMorgan Chase, Citigroup and Bank of America in the US or HSBC, RBS and LLoyds TSB in the UK. This is major. Look at my posts on Chinese shunning trade with French banks or The European Bank Run.”
http://www.creditwritedowns.com/2011/09/chinese-shunning-trade-with-french-banks.html
http://www.creditwritedowns.com/2011/09/european-bank-run.html
If I were owning both parties, I’l let them switch places in 2012. It will settle the sheep down for a while, while they wait for change that isn’t on its way.
Darnit, I seem to remember predicting that this country would go to pot in Summer 2011. It’s the only time they could allow it to happen and still have time for a “turnaround” before the 2012 elections.
Perhaps “they” weren’t going for a turnaround before the 2012 elections?
Do central banks collude on domestic policy interventions? This article seems to suggest they do.
Bank of England and Federal Reserve ready to shore up struggling economies
The Bank of England has sent the clearest signal yet that it is poised to restart quantitative easing, as across the Atlantic the Federal Reserve unleashed fresh measures to shore up America’s recovery.
A worker checks sheets of uncut 5 notes for printing faults.
The MPC believes the growth outlook has weakened to such an extent that further stimulus will be needed Photo: Alamy Angela Monaghan
By Angela Monaghan, and Richard Blackden
9:07PM BST 21 Sep 2011
Minutes of September’s meeting of the Bank’s Monetary Policy Committee (MPC) showed the MPC believes the growth outlook has weakened to such an extent that the risks to inflation have “clearly increased” to the downside and that further stimulus would be needed.
“This is a major shift in the MPC’s thinking which, until now, had generally been agnostic as to whether extra QE would be needed,” said Michael Saunders, economist at Citigroup.
While the MPC stopped short of voting for more QE this month, in Washington the Fed’s Open Market Committee (FOMC) announced a new package of policies designed to stimulate the economy by lowering long-term interest rates. In a plan dubbed “Operation Twist”, the Fed said it will buy $400bn of US government bonds with longer maturities and sell the same amount of bonds with shorter maturities.
…
Korean Banker Commits Suicide
“The head of one of South Korea’s ailing savings banks has hurled himself to his death from his office as the government tries to stop a spiraling bank corruption scandal from infecting the broader financial system.
Jeong Gu-haeng, chief executive of Jeil 2 bank, threw himself from a sixth floor window on Friday after investigators raided his office, police said.”
Just think if Wall Street bankers had his morals, they would have had to shovel them up in 2008.
He got caught.
For Wall Streeters to jump you need that investigator raiding the office.
I don’t think our guys are scared much.
Cheney-$hrub $hadow Legacy SEC “The Enforcer”, crissy cox lives unlavi$hly in Newport Beach, CA.,…long long way from DC & Manhattan, NY
“Just think if Wall Street bankers had his morals,”
Exchange the word “morals” with “conscience” and you can begin to understand the problem. The pharmaceutical industry has been dispensing a whole slew of “conscience blocker” meds over the years. You’d be surprised how many people take ‘em, producing a sort of detachment that masquerades as stability. I VERY briefly worked in a situation where 2/3 of the employees were taking one anxiety/depression/social mood disorder med or another and on breaks, they’d sit around and compare meds. Creepy. I’d be willing to bet that more than half of Wall Street and Washington is on “conscience blockers”.
Creepy. I’d be willing to bet that more than half of Wall Street and Washington is on “conscience blockers”
Duzoxin: “The Secret To Sexy… The Secret To Slim.”
So, A ginormous yellow Hummer is driving around “The O.C.!” plastered with logo’s, lettering, and graphics of a pill the size of mini-cooper car…
(Hwy, wonders what message that sends to all the kids riding with mom & dad on their way to school.)
Duzoxin: “The Secret To Sexy… The Secret To Slim.”
Pill / Pimp / Pu$her
SSRI are at the root cause of this “moral hazard” way of banking?
wow that would be werid how much of that stuff is sold these days ?
When will unlisted, empty defaulted inventory hit the market? It’s out there. I see it every day.
So does “the all high above one” Ms. Sunshine, & “the all low below one” Mr. Decay
Now is the time to buy stocks. Really. (At least according to this young whippersnapper, that is…)
Don’t miss the strawman caricature of the stock market: It will either drop all the way to zero or otherwise soon go all the way back to DJIA = 20K. People made similar nonsensical statements about the future value of U.S. housing, circa 2006.
There is no middle in a porcine beautician’s world.
Sept. 23, 2011, 8:45 a.m. EDT
Tune out the fear and panic
Commentary: Seize great stock opportunities now
By James Altucher
NEW YORK (MarketWatch) — The world is ending. You heard me. Europe is going to default. The U.S. will go into a depression, the dollar will shrink to nothing, Congress and Barack Obama will continue to fight in the Coliseum while us citizens shout and roar from the stands, and stocks will go down forever. To zero maybe.
All of that rioting that is in Libya will spread like a “contagion” to here. And in 13 billion years, the perimeter of the sun will be so wide it will suck us in, a cold dark Earth, a shadow of what it once was.
Do I worry? Me? Mr. “Dow 20,000?” Of course I do. I get worried that people will believe the lies listed above that are spread every day. The newspapers have to report the worries. That’s a reasonable function; awareness is important. But then you have major responsibilities that most people forget: Analysis and Action. You need to look at the data and decide what is real and what is now. Then take action to make money.
Let’s look at some basic facts:
…
Outside the Box was the lead title Mr. Bear.
Who was it that posted just yesterday about the mathematician that built the fence around himself and said he was outside?
if Zero = half- empty & DOW 20,000 = half-full,… then clearly, this fella’s progno$tication’$ cupeth runneth over…
Hwy does like this POV:
E) The government is going to cut a lot of jobs. Won’t that reduce GDP? Definitely not. Look at 1945. The government eliminated 10 million (!) jobs when the soldiers returned. I don’t recall the Great Depression of 1945, do you?
Let’s look at some basic facts:”
America is old and tried and broke
America is old and tried and broke
I take it your a non-skateboard, non-iPhone, non-wii-chess user.
How about Kite-surfing ever try that?
Is this a great time to buy the dip, or did another recycled bubble just bite the dust?
Sept. 23, 2011, 10:00 a.m. EDT
Radio update: The gold rush seems to be over
The latest money news from Ann Cates, including a move by publishers to offer on-demand paperbacks.
Deja vu all over again?
Congress Girds for a Government Shutdown Sequel
Erik Hayden 9:15 AM ET
“There’s no threat of government shutdown,” House Speaker John Boehner said last night, a sentiment that doesn’t seem so comforting Friday morning. The Republican-controlled House did pass a disaster relief bill by a thin 219-203 margin last night that included $3.65 million dollars to help refill the coffers of the Federal Emergency Management Agency, The Los Angeles Times wrote. But it also included what the paper colorfully described as a “poison pill” of provisions that Harry Reid and Senate Democrats would never go for. Things like, as the paper reports, taking “$1.5 billion from a green vehicle program that Democrats champion as a job creator” and “$100 million from an Energy Department account” that loaned money to the bankrupt solar-company Solyndra to send a message. The New York Times had a sober appraisal this morning:
The House version is headed to a vote expected sometime on Friday, The Washington Post said, adding: “Without a stopgap in place to buy time for further negotiations, the government will shut down at month’s end.”
GOP Congre$$ional “TrueAngry’$™” = “TrueeCONomiccomical$edition’s™”
still flipping and making money ? looks like it at 93021
6725 Lafayette Ct moorpark ca 93021 sold 345K all cash listed a few weeks later for 489K this thing sat for years look it up
Is this still a viable business ? in So CA it sure seems to be ? how about other areas ?
So we are stalled until 2021. How do we handle this type of economy? whats it going to look like in 2021? vast cities of nursing homes in flyover land with most high paying jobs on the coasts?
“As the first wave of that pig-in-a-python generation — the 79 million Americans born between 1946 and 1964 — move into retirement, experts warn a boomer stock sell-off could cause equity valuations to plummet, likely sending the portfolios of young investors into a tailspin.
“The peak of the valuation in U.S. equities was 10 years ago,” says T. Doug Dale Jr., an adviser with Security Ballew Wealth Management in Jackson, Mississippi. “Valuation levels are coming down. You have a lot of baby boomers selling off assets as they need to liquidate for retirement and that will further exacerbate the decline in valuations.”
Researchers from the San Francisco Federal Reserve recently said that demographics actually point to a bearish trend in stocks. Aging populations create headwinds in the market, they said after studying the link between demographics and asset prices.
The Fed researchers looked at the ratio of investors aged 40 to 49 (those likely trying to build equity) to those aged 60 to 69 (those likely to be shifting allocation toward safer investment vehicles such as bonds).
They then compared this ratio to the year-end price/earnings ratio from 1954 to 2010 and found a strong correlation between shifting demographics and stock prices. Their results spell bad news for a full market recovery:
The model-generated path for real stock prices implied by demographic trends is quite bearish. Real stock prices follow a downward trend until 2021, cumulatively declining about 13 percent relative to 2010. The subsequent recovery is quite slow. Indeed, real stock prices are not expected to return to their 2010 level until 2027.
But…but….
I didn’t think J6P’s stock portfolio/401K meant anything, since J6P only owns 5-10% of all the shares outstanding. And they have been “selling off assets” since 2008.
Yeah, that brain-dead J6P. Blame him for all the problems.
This is paticularly a problem when the new generation is paying off $40K to $100K or more of student loans and may not have a 401(k) match to motivate them to participate.
Old people get COLD easily so hard winters in Kansas are not good…..maybe the Midlands of south carolina????….little enclaves of 50,000 people in 100 high rise nursing homes? light rail cars to take you to the malls…. Makes Sun City look like a kids place to live.
———- vast cities of nursing homes in flyover land
401Ks parroting large, mid, or small cap may, indeed, suffer from the sphincter syndrome. GLD lovers no longer gloat. Unless you were a bear investor, you are, like me, severely injured, albeit hopefully only temporarily.
Shitty week, huh?
US is too broke and confused to compete with China. We will be out engineered and out spent. then what ?
“The collapse of Solyndra LLC has renewed demands from U.S. lawmakers and union leaders that the Obama administration pursue unfair-trade complaints against China for out-sized subsidies to its clean-energy companies.
“The American solar industry is facing unparalleled challenges, and without the leadership of your administration this industry may disappear,” Senator Ron Wyden, an Oregon Democrat, said in a Sept. 8 letter urging President Barack Obama to file a complaint against China with the World Trade Organization.
Wyden wrote two days after Solyndra, which received $535 million in loan guarantees from the Energy Department, filed for bankruptcy protection. China provided $30 billion in credit to its biggest solar manufacturers last year, about 20 times the U.S. effort, Jonathan Silver, executive director of the Energy Department’s loan program, told a congressional panel Sept. 14.
China “frequently provides both zero-cost financing, occasionally free land and other kinds of incentives and subsidies” to its wind and solar companies, Silver said. Silver called for the U.S. “to take on this challenge” for a global market that will be “worth trillions of dollars.” He didn’t join critics such as Wyden and the United Steelworkers union who say China’s subsidies should be challenged as unfair.
“frequently provides zero-cost financing, occasionally free land, and other kinds of incentives and subsidies……”
And how is this different than US provided corporate welfare/blackmail?
i am always amazed how people scream about subsidies to emerging industries, yet continually back subsidies and tax breaks to these large mature industries (eg, oil, agribusiness).
Sound advice or NAHB propaganda?
Why You Should Consider Buying a New Home
Sept. 23, 2011
In this day of drop-dead prices on existing homes, why would anyone shell out for a new house? Amy Hoak on Lunch Break says there are a few good reasons why home buyers should not ignore new-home construction in their search.
Weekend topic suggestion: we told each other not to buy in 05-07 and we were right. We told each other to wait in 08 and during last year’s tax credit CF.
What are we telling each other now?
Don’t walk past tall buildings on Wall Street and look up in the sky, lest a stock trader might land on you.
Weekend question — Does anybody know why tptb didn’t just form an RTC this time to liquidate all the foreclosures? It worked well enough in Texas in the 80’s.
I’m thinking TPTB were going to take a serious loss this time if things were handled the normal way. The normal way would have resulted in big banks going under…banks owned by TPTB. That’s just my guess…
Has the stock market put in a bottom yet?
Investors fear governments can’t stop new recession
By John W. Schoen, Senior Producer
Global stock markets fell in lockstep this week because investors all share a common fear: The world is slipping back into recession and governments around the world are powerless to stop it.
Two years after the world emerged from the worst financial collapse since the 1930s, a repeat is looming. European Union officials have been unable to forge a political consensus among the union’s 17 members to head off a debt default by Greece. Some of Europe’s banks won’t have the capital to withstand the expected losses on their holdings of Greek debt.
European leaders are now preparing for an “orderly” default, according to published reports.
Though they’ve cobbled together a fund to backstop Greece’s $500 billion debt, it’s not enough to cope with a possible default four times as big by Italy, which is in the early stages of the downward spiral that sank Greece.
“Greece is gone, the markets know that,” Allen Sinai, chief economist at Decision Economics. “We’re now looking at Italy and Spain and the potential for Italy going. And that’s what’s so scary.”
Scarier still is the growing sense that Europe’s political leaders are powerless to stop the downward spiral. Despite repeated assurance that they are prepared to act, European officials have been paralyzed by deep political division over the issue of whether wealthier countries like Germany and France should bail out their weaker neighbors. As the crisis has deepened, the political divide has widened.
Leaders of the 20 largest economies, meeting in Washington this week, made yet another pledge to act.
“We are taking strong actions to maintain financial stability, restore confidence and support growth,” the G-20 joint statement said. “We commit to take all actions to preserve the stability of banking systems and financial markets as required.”
But there was little indication of what those actions might be.
The stock market appeared to find a bottom Friday after a week of heavy selling that wiped out roughly $1 trillion in market value as measured by the Wilshire 5000, one of the broadest market indices.
…
Did the Government kill the banks? Bove says yes
September 23, 2011, 5:44 PM
U.S. bank lending has been on the decline since March, with overall loan volume falling between 0.1% and 3.2% each week, according to the Federal Reserve.
Reserves at the U.S. Central bank have risen by $1.6 trillion while overall lending has declined by $84 billion. That’s a bad sign for an economy that needs to fuel a recovery at least in part through credit.
So, is it just a matter of credit tightening amid a down cycle or is there another force at work?
Dick Bove, the Rochdale Securities bank analyst, argues Friday that government policies have made credit harder to come by. He says federal policies have broken the system. Among the misdeeds: required increased capital levels and liquidity requirements (explaining the increase in Fed reserves), low interest rates that cut profits on lending, flattening of the yield curve reducing the incentive to lend at all, mandated price controls on some banking products and, finally, raising costs through regulatory “burdens.”
Bove has earned a reputation since the financial crisis of being a bank cheerleader, but his arguments have some merit. Post-crisis policy has made it harder or, at least, less attractive to do banking. That’s why bank stocks were in steep decline even before the August tumult in the broader market.
Moreover, that’s why even the most resilient of banks, such as J.P. Morgan Chase & Co. JPM, are down more than 30% year to date, while the S&P 500 SPX is only off a little more than 10%.
It may not be all the government’s fault given the legal liabilities lingering from the housing bust and the inter-connected relationship between U.S. and European banks, but the government hasn’t helped.
Perhaps Bove might accept the thesis that the banks, having mortally wounded themselves through poor lending practices, are suffering from the care of Washington as doctor.
Is central banking destined to soon become just as boring as dentistry?