The Housing Bubble

Boy, I sure did miss “It’s Friday Desk Clearing Time …”

Excuse me Truro, don’t you know that I am rich?

Mansion demolition order has Truro residents debating

TRURO - The largest single-family house in this singular sliver of Cape Cod is a sleek, glassy, contemporary concoction whose 8,333 square feet, spread and stacked on top of a dune, offer a $10 million view of the shimmering bay.

Construction ended only months ago, and the owner, a woman from Boca Raton, Fla., has not moved in. If the town has its way, she never will. In a recent decision that has delighted or dumbfounded residents, Truro officials have ordered the dream house demolished by mid-April.

The Klines received a building permit in May 2008 that approved the house as an “alteration’’ to a much smaller house elsewhere on the property. In May 2011, the state Appeals Court rejected the new residence as an alteration, and the Truro Zoning Board ordered the permit revoked.

“An entirely new building on a different location, which is also completely different in appearance and more than four times the size of its predecessor, cannot correctly be deemed an ‘alteration’ of the original,’’ the court ruled.

http://www.boston.com/news/local/massachusetts/articles/2012/02/03/truro_orders_demolition_of_sprawling_mansion_situated_on_landscape_painted_by_artist_edward_hopper/?page=1

Paging Rio:

http://www.boston.com/news/world/latinamerica/articles/2012/01/30/brazilian_bikinis_burgeon_to_fit_the_fat/?camp=obnetwork

I don’t care what year it was you don’t pay 385k for a Detroit condo…ever

Detroit— City Council President Charles Pugh is facing foreclosure on his mortgage and says he likely will abandon his $385,000 Brush Park condominium.

Pugh would like to keep the condo but needs a “substantial decrease” in the mortgage, spokeswoman Kirsten Ussery said.

“Absent that, yes, he is going to walk away,” she said.

Pugh paid $385,000 for the three-story, two-bedroom townhouse east of Woodward in 2005. But following a prolonged decline in housing values, a condo next door recently sold for $80,000, Ussery said.

http://www.detroitnews.com/article/20120113/METRO/201130421/1409/rss36

Got a Newt Gingrich robo-call (on my f*ing cell phone!) yesterday from (855)275-6398 defending himself from negative advertising.

Sorry Newt, but I don’t watch TV (except for C-Span) and I’ll be caucusing for Ron Paul on Tuesday.

“I believe our voting system is rigged.”

No. Even the vote-counting techniques of certain past dictators would not have won Florida for Ron Paul. ISTM that Ron Paul supporters simply do not realize that one vote, no matter how passionate, still counts as one vote.

Sounds instead like you’re feeling the bite of our campaign finance system.

Ron Paul is on “This Week” right now.

Nation’s Housing
DEPRESSED HOME PRICES FUEL SPIKE IN REMODELING
By Union-Tribune
12:01 a.m., Feb. 5, 2012

Do you fit any of these descriptions?

• You came through the housing bust and recession far more debt-averse than you were before.

• You’ve been reluctant to consider selling your house because you don’t believe you’ll get what it’s really worth.

• Buying a new home is out of the question, even with today’s low interest rates, because it’s so difficult to qualify for a mortgage.

• You’ve gradually come to the conclusion that it’s smarter to improve the house you already own — spend some money on making it more comfortable, more up to date — and just stay put for a while.

Whether you share them or not, sentiments like these are having profound effects on real estate markets across the country, fueling post-recession interest in remodeling. In fact, according to federal estimates, by late last year the annualized dollar value of expenditures on renovations outstripped expenditures on newly constructed single-family homes — a huge change from pre-recession years, when the ratio was sometimes 3-to-1 in favor of new construction.

Underscoring this trend: In late January, the National Association of Home Builders’ remodeling market index hit its highest level in five years. It’s not that remodeling is moving into boom territory, said David Crowe, chief economist of the association, but rather that for many consumers, fixing up their house now fits their sentiments — and their finances — far better than selling or buying.

Interviews with builders and remodelers in different parts of the country point to important changes in homeowner strategies. In Seattle, Joe McKinstry, president of Joseph McKinstry Construction Co., says inquiries about possible remodeling projects have nearly tripled in the past 12 months.

“I feel like people are starting to say, ‘Well, we’re not going to move anytime soon because, if we do, we’re going to get 30 percent less than the house is worth. Why don’t we do something in the kitchen or bathroom for our own enjoyment?’ ”
…

Will housing come back after the Souper Bowl?

P.S. Methinks “The Donald” should consider changing his last name to Frump.

Business
2/03/2012 @ 12:22PM
After Two Decades, Real Estate Returns To The Super Bowl

Football and housing. What do they have in common? Super Bowl XLVI, as it turns out. For the first time in 21 years, a residential real estate company will run a commercial during the big game. Century 21 Real Estate, an international realty powerhouse, is coughing up some serious cash to run a 30-second ad during the third quarter of this Sunday’s Super Bowl. It is the first time Century 21 has ever taken out a Super Bowl ad.

“In 2011 we [Century 21] celebrated our 40th anniversary. Prior to last year’s Super Bowl is when we decided we really wanted our full year celebration to culminate in something big and we view this as something big,” says Bev Thorne, chief marketing officer of Century 21. Though the company, owned by privately-held Realogy Corp., declines to disclose how much it spent on this marketing campaign, a 30-second spot during this year’s game is estimated to cost about $3.5 million — just for placement.
…

Notes from the Real Estate Bowl
Written by John McNulty
Published: Friday, 03 February 2012 07:46

This article goes well with nachos!

Nachos, because on Super Bowl Weekend there are really good signs that the economy is improving and that the real estate game has bright prospects ahead, as do the Niners and the Raiders. We will just have to wait ’til next season.

Real estate sales season is on and it’s perking up. Realtors like me are hoping this is really in, the market correction.

Even the annual home sales doldrums of this past winter were more productive than those of the past couple of years. So we are rooting for more home-sale touchdown deals this year for our home buyers and sellers. We’d like to cast off the psychological shoulder pads and helmets from the rough play and short yardage plays of the past few seasons.

Here are some real estate bowl recollections and projections.

You can give real estate a close point spread this year. Sales will improve in the coming months while prices will improve more gradually.

Past season turmoil hit hard. Experienced Realtors learned to punt just to remain in the game. Deals that looked solid with powerful offensive lines and veteran game plays found closing the deal mystifyingly unsure in the final yards. Fumbles happened often in the last minutes without even a 2-minute warning. It seemed deals couldn’t convert to closed, even in overtime.

Our experience with the nowdefunct American Home Mortgage Company in 2007 is a tale Charlie Brown and Lucy know well. Here the purchase money to buy the house (at the corner where West Holmgren and East Holmgren meet) was delivered to the title company for a close in two-to-three days max! In real estate sales this prompts a touchdown call. The escrow officer calls the buyer’s agent about their mortgage money having come in. The agent is pleased to call the buyer who does one of those celebratory dances and then calls the moving company.

With this good news the escrow officer blows a whistle and raises both arms high.

“Close of escrow” is at hand. Is it time to celebrate? Reminder, this is 2007, the beginning of the financial meltdown period.

But the buyers are so ready! So many important events are now past us. We are done with house hunting, the offer and its acceptance. We are finished with the inspections, the disclosures having been read and accepted. Terms are now settled. We had sleepless nights warding off buyer’s remorse. The outrageously high stacks of loan documents are newly signed.

You cannot be more ready to own a house, except at that moment the game whistle was blown. The bubble burst. American Home Mortgage (suddenly having gone bankrupt! ) faxed the title company with a demand, “Return purchase money immediately.” The signed docs were voided, money returned to pay bankrupt company bonuses (no doubt), not a penny remained in the title to buy the house.

Lucy had just pulled the ball. The buyers were left on their backs like Charlie Brown with little star images over their eyes. Both the selling team and the buying team were in an empty escrow stadium and the cheerleaders had gone home. That was ‘07.

Whew, those days are behind us, fingers crossed! We’re ready for the Real Estate Bowl to begin. Just flip the coin, referee.
…

Foreclosure To Rentals?
Fed pushes bulk property sales to investors
By Matt Pilon
Worcester Business Journal Staff Writer
02/06/12

What if Fannie Mae and Freddie Mac sold, in bulk, the more than 1,100 foreclosed Massachusetts properties they own to investors who promised to convert them to rental housing?

The Federal Reserve recently called on Congress to approve of such a program nationwide and encourage private lenders to participate. Action by Fannie and Freddie, the private, federally sponsored agencies that support the housing market, could have a significant impact because their “real estate-owned properties,” or REOs, account for about half of all REOs nationwide.

Housing experts think an REO rental program could help the Massachusetts market, but said there would be significant challenges to managing such a large-scale program.

“I think it’s a great idea, anything you can do to keep houses from being vacant, keep neighborhoods from being neglected I think is good,” said Timothy Warren, CEO of the Boston-based Warren Group.

No Slam Dunk

But there are reasons such a program has never been tried. Warren said it’s unclear if the properties’ owners would be willing to commit the resources necessary to manage a large portfolio of foreclosure rentals.

An REO program could be of particular significance to Central Massachusetts, which has a higher proportion of foreclosure-distressed communities than other areas of the state, though foreclosures declined in 2011.

Fannie and Freddie owned at least 242 foreclosed properties in the Worcester metropolitan area as of July, according to the Federal Housing Finance Administration.

North Brookfield, Winchendon, Fitchburg, Hardwick, Athol and Worcester all have more than 19 distressed housing units for every 1,000 units of housing, according to a November report by the Massachusetts Housing Partnership.

Timothy Davis, a research consultant for the partnership, said an REO rental program would have to overcome logistical challenges.

“One of the biggest challenges to converting these is the management,” Davis said.

Lenders would have to bring the properties up to a desirable condition to rent, and there is the question of exactly who would market and manage the properties. Additionally, he said, in more suburban and rural markets, there just may not be as much demand for rental units.
…

Darrell:
“Money is your or other peoples’ debt that you buy it with.”

CIBT:
“This is a point which many posters here often push which seems more platitude than substance.

Why can’t there be money without debt? Money is a medium of exchange that we mutually agree on. It enables trade between two parties who lack the double-coincidence of wants. There are societies where debt is illegal which nonetheless have money to facilitate trade.

I can’t get past the point in your rant where you assert that ‘money is debt’ without a shard of justification to your argument.”

It is not a rant, it is an argument. Rants are filled with emotion, anger, etc.

An argument is a set of logical statements supporting a conclusion.

I will give you two examples to highlight the difference:

RANT:
“Case in point: Do cigarettes or piggy-back rides qualify as “debt”? They do function as currency (aka money), though, in settings where greenbacks are scarce.”

OMG you F’n fool. I can’t believe how stupid you must be to think that the United States economy runs on cigaretes and piggy back rides.

Why don’t you go into the grocery store, fill up your cart with groceries, then go to the register and ask how many cigarettes and ponyback rides they want in exchage for the groceries. Then, let them try to explain to your dumb donkey why dollars are money, not cigarettes, piggyback rides, or even gold or silver.

I don’t know of a single store in the country that accepts anything but dollars. There are laws that companies can’t pay in anything but dollars.

In our economy, dollars are the only money, and dollars are most assuredly borrowed into existence.

If you don’t get this by know, then there is something seriously wrong with you. You need professional help above my ability to deliver.

NOW, that above is a rant. That is not what I’m doing here on this site. I do more like the below.

Argument:
Let’s say for a moment that there are 2 types of money. Let’s say that people are openly exchanging drugs for sex with prostitutes. In this case, the drugs could be considered a medium of exchange. You go up to a hooker and ask how much for oral, and she says, a dime bag.

Oh, wait. A dime bag indicates $10 worth, so that means the real underlying unit of exchage is still dollars.

Okay, the pro says 2 rocks. Okay, drugs are now the medium of exchange and serve the purpose of money.

This barter currency then sits along side dollars in the realm of money.

Wealth (goods and services you buy) now overlap in the euler diagram with dollars (borrowed into existence and always offset by debt).

Now, let’s exampe trade imbalances. The barter currencies do not allow trade imbalances. If china was accepting cigarettes, piggy back rides, or crack rocks in exchage for Iphones, then there would be balanced trade and no problems.

If the “people with money” were collecting closets full of cigarettes, piggyback rides or drugs, no problems.

Unfortunatly, what China accepts in exchange for all those IPhones is the type of money that is borrowed into existence. What the people with money are accumulating is the type of money that is borrowed into existence.

So, where I used to say, those with debt can’t possibly repay it, unless those with money spend it…

Would it be better for me to say, those with debt can’t possibly pay it back, unless those with dedt-money convert that debt-money into barter/commodity-money, or start accepting barter/comoddity-money as repayment for the debt-money.

Come on, can’t you see how lame that is?

We have goods and services that are created from resources and labor. We have this other stuff that is an IOU that was created from debt.

To overlap their Euler diagrams, is totally unnecesasary in a post barter economies that has existed for hundreds of years.

The ONLY reason I can think of that people refuse to distinguish the hard-line between wealth (resoruces and labor) and money (borrowed into existence) is stuborn refusal to accept that gold and silver no longer serve as money.

Once upon a time, the hooker an the john, looking to exchange drugs for sex, would have said something like pounds or pence with silver or gold being the “unit” into which each converted the goods and services to establish equivilance. Now, they call it a dime bag, with debt/dollars the understood common unit of exchange.

It’s now the 2000s, with a global economy with 7 billion people, services make up a significant portion of the economy, and mass quantities of money move around the globe with push of a button. People need to stop living in the 1800s barter economy.

See the difference between a rant and an argument?

Yesterday there were several posts about debt destruction being bad.

I don’t get it. Why is debt destruction bad?

Here is a dirtbag that`s probably in or close to the top 1%.

Polo club founder Goodman adopts his adult girlfriend

By Jason Schultz
Palm Beach Post Staff Writer
Posted: 4:39 p.m. Tuesday, Jan. 31, 2012

Polo club founder John Goodman has adopted his longtime adult girlfriend as his legal daughter in what plaintiff’s attorneys are calling an attempt to shield assets from a civil suit filed by the parents of a Wellington man killed in a car crash.

“The events which serve as the grounds for the relief sought by the Plaintiffs border on the surreal and take the Court into a legal twilight zone,” wrote Circuit Judge Glenn Kelley in an order granting attorneys for Lili and William Wilson the right to information concerning Goodman’s adoption.

The Wilsons are suing Goodman for wrongful death in connection with the Feb. 12, 2010 crash that killed 23-year-old Scott Patrick Wilson. According to Palm Beach County Sheriff’s reports, Goodman ran a stop sign on 120th Avenue on Feb. 12, 2010 and hit Wilson, who was driving west on Lake Worth Road. The civil trial is set for March 27.

“The Court cannot ignore reality or the practical impact of what Mr. Goodman has now done,” Kelley wrote. “The Defendant has effectively diverted a significant portion of the assets of the children’s trust to a person with whom he is intimately involved at a time when his personal assets are largely at risk in this case.”

In a deposition taken in the lawsuit last May, Hutchins told attorneys she started dating Goodman in 2009.

Tests taken several hours after the crash revealed Goodman had a blood alcohol level of more than twice the legal limit to drive in Florida. He faces a criminal trial on March 6 on charges of DUI manslaughter, vehicular homicide and leaving the scene of a crash and could face up to 30 years in prison.

http://www.palmbeachpost.com/news/polo-club-founder-goodman-adopts-his-adult-girlfriend-2138913.html - 77k -

So the new plan is to transfer wealth from GSE bondholders to homeowners who want to refi at lower rates? The WaPo editorial board apparently takes no issue with changing the rules of the game at half time.

Perhaps the MBS investors will accept the losses handed to them without complaining very loudly?

The Post’s View
Halfway home
By Editorial Board, Published: February 4

PRESIDENT OBAMA’s latest plan for the distressed housing market is, in essence, an effort to stimulate more mortgage modifications — that is, to succeed where previous plans, by the president’s own admission, have fallen short.

Is there any reason to be optimistic this time? The president proposes government-backed refinancing for millions of additional “underwater” homeowners who are current on their mortgages, saving them an average of $3,000 a year in interest. This would apply to 11 million loans backed by Fannie Mae and Freddie Mac and, for the first time, 3.5 million mortgages currently backed by the private sector.

Even partisans should be able to agree on this reform.

The new loans for the latter would be insured by the Federal Housing Administration. The cost, at least $5 billion depending on participation rates, would be paid by banks, which would be charged fees, and by current holders of mortgage-backed securities, who would be bought out at face value rather than market rates.

Congress probably won’t, and shouldn’t, sign off on that part. Billed as a twofer that prevents foreclosures and stimulates consumer spending, the proposal actually just shifts money around — the proposed fee on banks would get passed on to customers — while adding risk to the FHA’s books. By focusing on those who have kept up their payments through the crisis, the president claims to reward “responsible” homeowners. You could argue that he is trying to make banks bail out borrowers who have shown they don’t need it.

Still, there are promising ideas in the package. As an alternative to taking lower interest payments in the form of reduced monthly payments, Mr. Obama’s plan would allow homeowners to convert the savings to equity. They’d pay the same amount as they do now, but their outstanding principal would decline more quickly. If Mr. Obama limited eligibility to loans already held by the government-sponsored enterprises Fannie Mae and Freddie Mac, there would be practically no additional risk to the government. As households build wealth, they become more confident about spending. Yes, that represents a transfer from Fannie and Freddie bondholders, but prepayment was a risk they assumed when they bought the paper. The administration can make these changes without congressional action.
…

Don’t know how many folks saw PBear’s post the other day regarding the JoshuaTree Extension, but there’s a new version available (2.0.1):

http://myplace.frontier.com/~drumminj_tx/download.html

Only a minor addition - a built-in timer to ensure you don’t post more frequently than 60s so that you don’t ever see Ben’s wonderful error page.

For most folks it won’t behave any differently.

According to the NYTs, any politician who does not “do something” to help homeowners refi into lower rates is “coldhearted.”

P.S. Wasn’t Groundhog Day just last week?

Editorial
An Easier Path to Refinancing
Published: February 4, 2012

It is only a first step toward healing the economy’s biggest open wound, but President Obama’s new mortgage refinancing plan could provide considerable relief for millions of homeowners shackled to high interest rates. If Congress approves it — unlikely, with resistance already mounting from Republicans — the plan could also put money in pockets and cash registers at a time when that is desperately needed.

Interest rates are now at historically low levels, but banks refuse to let millions of homeowners refinance, because their credit is not stellar or because their homes are worth less than what they owe. High fees and intimidating red tape have kept many borrowers from even trying.

Last fall, the White House announced a plan to help as many as 11 million homeowners by relaxing refinancing rules for mortgages held by Fannie Mae or Freddie Mac, the government-sponsored companies. But neither has agreed to eliminate appraisal costs and other fees, or to ease the application process. The president’s new plan, announced last week, asks for legislation to require those changes.
…
The program demonstrates a clear contrast with Republicans, both in Congress and on the presidential campaign trail. Many, including Mitt Romney, want the government to do nothing to help homeowners on the verge of foreclosure. That should not stop the White House and other Democrats from vigorously making the case that there is an alternative to that coldhearted prescription, if lawmakers would just seize it.

Could anyone who can find the story about Gingrinch claiming his Belfast trip was sponsored by Habitat for Humanity, not F&F, please post it?

Gingrich Ties to Fannie, Freddie Said to Extend to Speaker Days
February 05, 2012, 9:16 AM EST
By Eric Engleman

Feb 4 (Bloomberg) — Republican presidential candidate Newt Gingrich had ties to Freddie Mac and Fannie Mae during his time as speaker of the House from 1995 to 1999, adding to questions about the nature of his relationship with the home mortgage companies.

Gingrich, then a U.S. representative from Georgia, visited Ireland in 1998 on a trip that was partly sponsored by Freddie Mac and Fannie Mae, the New York Times reported today. Gingrich also helped thwart measures that would have boosted fees paid by the two mortgage companies, the newspaper reported.

Gingrich’s consulting work for Freddie Mac after he left Congress has emerged as a theme in the Republican presidential nomination campaign and drawn criticism from rivals. Freddie Mac and Fannie Mae have drawn about $153 billion in taxpayer aid since losses from risky mortgages caused them to be brought under U.S. conservatorship in September 2008.

Gingrich spokesman R.C. Hammond didn’t immediately respond to an e-mail requesting comment on his connections to Freddie Mac and Fannie Mae during his time in Congress. Douglas Duvall, a Freddie Mac spokesman, declined to comment. Andrew Wilson, spokesman for Fannie Mae, didn’t immediately respond to an e- mail seeking comment.

Belfast Visit

Gingrich visited a home-building project in Belfast, Northern Ireland, as part of a 1998 trip that was sponsored by Fannie Mae and Freddie Mac, the Times reported.
…

Obama Uses Housing as Foil to Romney’s ‘Hit Bottom’ Strategy
February 03, 2012, 9:55 AM EST
By Mike Dorning and Lorraine Woellert

(Adds decline in mortgage rates in seventh paragraph. For more on the 2012 elections, see ELECT.)

Feb. 2 (Bloomberg) — President Barack Obama is escalating the fight over how to revive the housing market, a sector of the economy that has dragged down growth for six years running, eroded consumer confidence and wiped out $7 trillion in American wealth.

Opponents said the president’s plan, announced yesterday, was as much about politics as the policy goal of easing access to refinancing for homeowners with negative equity. It helps the White House frame differences with Republican presidential candidates and with Congress, which for two straight years has rejected a bank tax that he said would be used to finance the program.

“This housing crisis struck right at the heart of what it means to be middle class in America: our homes,” Obama said in a speech in the Washington suburb of Falls Church, Virginia. “We need to do everything in our power to repair the damage and make responsible families whole.”

Paul J. Miller, a bank analyst at FBR Capital Markets in Arlington, Virginia, said that while it doesn’t “have a prayer in hell of passing,” the proposal may help Obama score political points. A bank tax is “bad public policy, but it’s populism at its highest,” he said.
…

Got no comment on this yesterday, perhaps due to late post. Bill Gross seemed to be an Obama backer a few years ago. Maybe someone can find a URL. The Pimco Bond King is for Ron Paul this year and is turning bullish on gold. Maybe Combotechie should take a look at the reasons Bill Gross gave. Links are within the link below.

http://www.ronpaul2012.com/2012/02/02/bond-king-bill-gross-im-ron-paulish/

A Mortgage Tornado Warning, Unheeded
Gary Bogdon for The New York Times
After his own experience dealing with a mortgage mess, Nye Lavalle set out to learn all he could about the mortgage industry, traveling nationwide to dig into records. In 2003, he compiled a dossier of practices at Fannie Mae. In hindsight, the problems he found look like a blueprint of today’s foreclosure crisis.
By GRETCHEN MORGENSON
Published: February 4, 2012

YEARS before the housing bust — before all those home loans turned sour and millions of Americans faced foreclosure — a wealthy businessman in Florida set out to blow the whistle on the mortgage game.

His name is Nye Lavalle, and he first came to attention not in finance but in sports and advertising. He turned heads in marketing circles by correctly predicting that Nascar and figure skating would draw huge followings in the 1990s.

But after losing a family home to foreclosure, under what he thought were fishy circumstances, Mr. Lavalle, founder of a consulting firm called the Sports Marketing Group, began a new life as a mortgage sleuth. In 2003, when home prices were flying high, he compiled a dossier of improprieties on one of the giants of the business, Fannie Mae.

In hindsight, what he found looks like a blueprint of today’s foreclosure crisis. Even then, Mr. Lavalle discovered, some loan-servicing companies that worked for Fannie Mae routinely filed false foreclosure documents, not unlike the fraudulent paperwork that has since made “robo-signing” a household term. Even then, he found, the nation’s electronic mortgage registry was playing fast and loose with the law — something that courts have belatedly recognized, too.

You might wonder why Mr. Lavalle didn’t speak up. But he did. For two years, he corresponded with Fannie executives and lawyers. Fannie later hired a Washington law firm to investigate his claims. In May 2006, that firm, using some of Mr. Lavalle’s research, issued a confidential, 147-page report corroborating many of his findings.

And there, apparently, is where it ended. There is little evidence that Fannie Mae’s management or board ever took serious action. Known internally as O.C.J. Case No. 5595, in reference to the company’s Office of Corporate Justice, this 2006 report suggests just how deep, and how far back, our mortgage and foreclosure problems really go.

“It is axiomatic that the practice of submitting false pleadings and affidavits is unlawful,” said the report, a copy of which was obtained by The New York Times. “With his complaint, Mr. Lavalle has identified an issue that Fannie Mae needs to address promptly.”

What Fannie Mae knew about abusive foreclosure practices, and when it knew it, are crucial questions as Congress and the Obama administration weigh the future of the company and its cousin, Freddie Mac. These giants eventually blew themselves apart and, so far, they have cost taxpayers $150 billion. But before that, their size and reach — not only through their own businesses, but also through the vast amount of work they farm out to law firms and loan servicers — meant that Fannie and Freddie shaped the standards for the entire mortgage industry.

Almost all of the abuses that Mr. Lavalle began identifying in 2003 have since come to widespread attention. The revelations have roiled the mortgage industry and left Fannie, Freddie and big banks with potentially enormous legal liabilities. More worrying is that the kinds of problems that Mr. Lavalle flagged so long ago, and that Fannie apparently ignored, have evicted people from their homes through improper or fraudulent foreclosures.

Until a few weeks ago, Mr. Lavalle, 54, had never seen O.C.J. 5595. He had hoped to get a copy after helping Fannie’s lawyers, at Baker & Hostetler in Washington, complete it. He didn’t.

But after learning about its findings from a reporter for The Times, Mr. Lavalle said, “Fannie Mae, its directors, servicers and lawyers appeared to have an institutional policy of turning a willful blind eye to evidence of mortgage origination and servicing fraud.”

He went on: “When confronted directly with this evidence, Fannie not only failed to correct and remedy the abuses, it assisted in continuing the frauds via institutional practices that concealed fraudulent foreclosures.”
…

If they say it is so, so it must be.

Why foreclosure investors are double-edged sword for economy
By Diana Olick, CNBC.com
Updated 23h 23m ago

The best and most expeditious way to clear the vast inventory of foreclosed properties weighing down today’s housing market is to get more investors in and sell them these properties at bulk discounts.

That’s what the Obama administration and Federal regulators are currently considering for the thousands of homes currently owned by Fannie Mae, Freddie Mac and the FHA.

While big private equity funds are still largely in a very tedious deal-making stage with banks or waiting on the sidelines for a government program, smaller individual investors are getting in. Nearly 23% of home purchases in December were by investors, according to a survey from Campbell/Inside Mortgage Finance. That is a slight increase from November, but the share has remained largely unchanged for the past year.

What has changed dramatically is how many of these investors are using all-cash … 74% according to the survey. The survey also found that “cash buyers are able to bid significantly lower — and successfully — on many properties because they offer a shorter and more reliable closing timeline.” That is precisely what mortgage servicers want.

“While investor bids may not be the first offers accepted, they often end up winning properties after other home buyers are eliminated because of mortgage approval or timeline problems,” according to the survey authors. “Appraisals below the contracted price are a common reason for mortgage denials. Most mortgage financing timelines are now in excess of 30 days.”
…

D.C. Current | SATURDAY, FEBRUARY 4, 2012
Fannie Mae’s Fire Sale
By JIM MCTAGUE

Fannie Mae will soon start auctioning off foreclosed houses and pools of non-performing loans in bulk. How to buy a cut-rate rental property.

Fire sale! The Federal Housing Finance Agency has approved a big residential real-estate auction at Fannie Mae to help the mortgage giant unload its inventory of 122,616 foreclosed houses. For the first time, the regulators are permitting Fannie Mae to sell houses in bulk. The test sale also will include pools of non-performing loans.
…

None of the serial bottom callers ever discusses the extraordinary measures the Fed currently has in place to prop up housing, or the likelihood they will continue indefinitely. I personally still expect other factors to eventually put an end to temporary housing price support measures.

Another contingency: What will happen to home prices when interest rates eventually increase from current generation-low levels?

I hear this argument that we need higher interest rates so that people can make a decent rate of return on their money.

Le’ts say for a moment that 8% is considered a decent rae of return.

$37T of debt in the USA. That is $3T a year in interest on the debt. 3/15 = 20% of GDP.

Total debt in 1980 was $4T and GDP was $2.5T. $4T * .08 = $320B. 320B/2500 = 13% of GDP.

In other words, before we can afford to pay a decent rate of return, about half the crrent debt needs to go away. That means that half the dollars need to go away.

Any attempt to raise interest rates at this time, with households already tapped out and unable to borrow more money into existence to pay the interest on their existing debt, would simply trigger cascade default where a large portion of the existing money supply ceased to exist.

There is simply too much debt/money in existence for peoples’ wages, at anything other than near 0% interest rates.

I keep hearing “I need somewhere to put my money”. No. What you need to do is SPEND your money so that people with debt can repay thier debt, destroying both the money and the debt.

Business
State Real Estate Drop The Worst On Record

Connecticut has the worst performance in more than two decades; In Madison, fewer homes were sold, but median sale prices increased.

By Chris Dehnel
Email the author
9:33 am

Home sales in Connecticut dropped 13 percent in 2011, making it the worst on record, according to The Warren Group, the preeminent compiler of real estate statistics in New England.

Boston-based Warren began tracking real estate data in the Nutmeg State in 1987.

Sales of single-family homes in Connecticut dropped to 21,141 in 2011, down from 24,270 in 2010, according to Warren statistics. It marks the seventh straight year in which sales volume declined from the prior year.

December’s 1,714 single-family sales represented a nearly 8 percent year-over-year drop from 1,858 in December 2010. Fourth quarter numbers were also down 6.5 percent year-over-year - 4,961 single-family home sales compared to 5,306 in the fourth quarter of 2010. It was the slowest fourth quarter for single-family sales ever recorded by The Warren Group.

Sales in New Haven County dropped, but not as precipitously as the entire state. December sales were actually 2.5 percent higher than last December, but the median sale prices showed a 12.33 percent decrease when compared to last December. Overall sales in 2011 were down 11.74 percent when compared to 2010. In Madison, sales in December 2011 dropped 42.11 percent, to 11 units from 19 in December 2010. Year to date sales were down 16.5 percent. The December median sale price was up 73.58 percent, and the year to date median sale price was up 2.98 percent.

Still, sales volume beat the first quarter 2011, when there were 3,950 sales, according to Warren’s report.

December represented the fourth straight month that single-family sales decreased in Connecticut. In all of 2011, year-over-year sales volume only increased in January and August.

“The market in Connecticut is very slow. I think it’s fair to say we are bumping along the bottom and can only go up from here,” said Timothy M. Warren Jr., the chief executive officer of The Warren Group. “As the employment picture and consumer confidence improves, housing will slowly follow suit.”

The median price for Connecticut single-family homes sold in 2011 was $243,000, a 2.8 percent drop from $250,000 in 2010. The median price for single-family homes sold in December dropped nearly 9.5 percent to $220,000, down from $243,000 during the same month in 2010.
…

Do any HBB posters have comments about Beantown home prices? Have they bottomed out, or is there another leg down to come? Is it some how different there in Beantown compared to the rest of the U.S. when it comes to home price declines?

I reiterate my point about the potentially ephemeral nature of extraordinary housing price support measures that are currently in effect. Serial bottom callers ignore this aspect of the housing situation at their peril.

Buying and selling, Markets
When it comes to prices, is this as good as it gets?
Posted by Scott Van Voorhis
February 1, 2012 06:31 AM

Sorry, but the great home price collapse is looking about as likely right now as a visit from the Great Pumpkin.

It’s hard not to come to that conclusion even with the latest Case-Shiller report.

The picture nationally is rockier than what analysts had predicted. Economists surveyed by Bloomberg had predicted a 3.3 percent drop in home prices nationally for November in the latest Case-Shiller report.

We wound up with a 3.7 percent drop and a 1.6 percent drop in Boston metro prices.

That puts housing values back at spring 2003 levels, or about an 18 percent decline locally, compared to as much as 30 percent nationally.

However, the numbers mask the unfortunate reality home buyers sooner or later find out about the Greater Boston market. The fact is, there really are no bargains out there, just homes, often in need of work, that are somewhat less inflated in price than they were five years ago.

Still, the bears were all over my post yesterday predicting price stability - gcbma brought up some good points.

Home prices in all three tiers are dropping YOY in Boston, according to today’s Case Shiller data. The middle and high tiers are dropping at a slightly faster rate than the previous reporting period, and the low tier (under $257K) is the only one slowing up its decline slightly.

I know people who have been trying to sell their (less than $400K) homes in mid-tier towns and (greater than $1M) homes in top-tier W towns and they’re all frustrated at having to reduce prices, agonizing over no offers, grumbling at having to consider and adjust reality to the only offers they’re getting (10-20% under asking, after 10% price drops). Don’t believe all the puffed-chest bullying and isolated tales that some of the bulls and Globe writers try to mock up here.

I’ll take a pass at responding to the silly jab about “bulls and Globe writers.” That said, gcbma raises a couple good points, though he misses the bigger picture here.

Some folks have clearly been waiting for the great home price cave in here in Greater Boston - defined here as within the I-495 belt - for years now.

But the great home price collapse hasn’t happened yet, and with every drop in the jobless rate, the chances of any significant collapse get more and more remote.
…

Is anyone looking to buy a San Diego home in the $60m+ price range? It’s current list price is down by $15m from what it originally listed for in 2007. (Never mind that it sold for only $25m back in 2000. Or that it has been on the market for over four years already without selling.)

For Sale (MLS-listed)
$61,000,000
929 Border Ave Del Mar, CA 92014
Beds: 9
Baths: 6
Sq. Ft.: 10,164
$/Sq. Ft.: $6,002
Lot Size: 5.5 Acres
Property Type: Residential, Detached
Style: Other
Stories: 2
View: Ocean, Panoramic
Year Built: 1937
Community: Del Mar Bluff
County: San Diego
MLS#: 071064797
Source: SANDICOR
Status: Active
Active
This listing is for sale and the sellers are accepting offers.

On Redfin: 1635 days

Variance granted for room dimensions. Drastic price reduction! This is undeniably a once in a lifetime opportunity to own one of the most exclusive and unique properties in the United States! Do not miss this extremely rare & remarkable opportunity to make this acreage in the heart of Del Mar your own. A spectacular waterfront property of over 5.5 acres atop the bluffs of Del Mar lays a beautiful canvas to build your very own vision of paradise with over 396 ft of oceanfront and includes 3 APNs. Tucked away down a quiet drive just west of Highway 101 and secluded behind a private gate lays your ocean front oasis with over 396 feet of prime ocean front land. This 5.5+ acre property is perched on the bluffs overlooking the Pacific Ocean and is just across from the prestigious Del Mar Racetrack. Del Mar Village and the shops of Solana Beach are both a short walk away. Discover the perfection of living at the waters edge with the ocean as your front yard. A two-story home is standing on the property which allows for rebuilding your own two-story home. This property allows for two single family homes. There are so many unusual qualities about this property it truly must be seen to be fully appreciated. Includes 3 APNs 298-241-0600, 299-030-1400 & 298-241-07-00.

Property History for 929 Border Ave
Date Event Price Appreciation Source
Jan 28, 2010 Price Changed $61,000,000 – SANDICOR #071064797
Aug 15, 2007 Listed $76,000,000 – SANDICOR #071064797
Jul 07, 2000 Sold (Public Records)
This was part of a multi-property
Multi-Property Sale
A sale in which more than one property was purchased simultaneously, resulting in a purchase price that may not accurately reflect the property’s real value.
more info

sale. $25,000,000 – Public Records

I’m seeing the early signs of capitulation in North County San Diego.

This loss alone would be sufficient to fund about six years’ worth of money thrown away on rent at the rate we have payed over the past several years. Of course, there are other costs of ownership to consider, such as Payments, Interest, Taxes, Insurance, Mello-Roos, HOA dues, maintenance, etc etc etc.

Sale Pending (MLS-listed)
Listed at: $379,900
11312 Meadow Flower Pl San Diego, CA 92127
Beds: 4
Baths: 2.5
Sq. Ft.: 1,835
$/Sq. Ft.: $207
Lot Size: 7,623 Sq. Ft.
Property Type: Residential, Twinhome
Stories: 2
View: Mountains/Hills, Park-like
Year Built: 1985
Community: High Country West
County: San Diego
MLS#: 110067727
Source: SANDICOR
Status: Contingent
Contingent
This means the sellers have accepted on an offer on the property, but success may still depend on passing a home inspection or the buyer’s financing approval. It may still be possible to tour these properties and submit a backup offer in case the current one falls through.
more info

On Redfin: 46 days

Obama, Bernanke Spotlight Housing as Path to U.S. Recovery
02.05.2012 by Staff

Both President Obama and Federal Reserve Chairman Ben Bernanke have come under fire for their respective responses to the economic crisis, including actions tied to or affecting the depressed housing market.

In recent days, both have spotlighted the vital role of housing in the overall economic picture. In doing so, they agree that a robust U.S. recovery is impossible without lifting residential sales, home prices and easing the foreclosure crisis substantially.

“Both residential sales and construction remain depressed,” Bernanke said in prepared testimony Thursday before the U.S. House Budget Committee. “A persistent excess supply of vacant homes, largely stemming from foreclosures, is keeping downward pressure on prices and limiting the demand for new construction.”

Bernanke’s reference to the housing market drew a statement of support from the National Association of Realtors (NAR).

“We fully support Chairman Bernanke’s comments that the lack of available and affordable mortgage financing, low home values and high foreclosure inventories are inhibiting a meaningful housing market recovery,” said NAR President Moe Veissi.
…

Monetary policy
Easier does it
Feb 3rd 2012, 18:34 by R.A. | WASHINGTON

WRITING on the surprisingly strong January jobs report, my colleague says:

Will the better tone to the jobs market deter the Federal Reserve from further monetary easing? Not yet. Ben Bernanke, the Federal Reserve chairman, acknowledged the moderately better tone to economic data yesterday, but the last official Fed statement and press conference strongly suggested the Fed is inclined to do more quantitative easing; we’d have to get more, and better, reports like this one to take that option off the table.

I agree that this report probably isn’t enough to change the Fed’s outlook. The jobs numbers beat expectations, but labour market improvement isn’t a surprise to anyone; the private sector has been adding nearly 200,000 jobs a month for the past six months. When the Fed met in late January it knew things were better than they’d been in a while, if not quite this good. The report certaintly shouldn’t deter the Fed from taking additional action. Even if the natural rate of unemployment has risen as high as 6.5%, the present unemployment rate of 8.3% implies quite a lot of labour market slack. Inflation has been falling in recent months, and the latest employment report shows that earnings growth has been muted, even as the pace of hiring has increased.

At the same time, I am a little concerned. The Fed’s latest economic projections—which, remember, assume that the FOMC is following an appropriate monetary policy—have a central tendency for the unemployment rate of 8.2% to 8.5% in 2012. It’s only February, and the figure is already at the low end of that range. Future inflation, as implied by 2-year breakevens, is up noticeably for the week, and rose above 2% on today’s good news.

If we were to take the Fed at its word when it says that its projections imply optimal monetary policy, then we’d have to conclude that absent a deterioration in the labour-market situation in February any new easing would be off. The FOMC might even find itself walking back some of its commitment to low rates through 2014.
…

Plosser slams Fed’s 2014 low-rate forecast

Philadelphia Federal Reserve President Charles Plosser speaks at an Economics21 event in New York, March 25, 2011. REUTERS/Brendan McDermid

By Jonathan Spicer

GLADWYNE, Pennsylvania | Fri Feb 3, 2012 2:58pm EST

(Reuters) - A top Federal Reserve official sharply criticized the U.S. central bank’s decision last week to telegraph ultra low interest rates for nearly three more years, saying on Wednesday the move undermined confidence and caused confusion.

The Fed’s policy-setting committee, citing a bleak outlook for the fragile economic recovery, said last week it expected to keep rates “exceptionally low” at least through late 2014. The forecast, which was contingent on economic conditions, pushed the target date some 18 months later than a previous forecast, and it sparked a rally in stocks and bonds.

“Such statements are, in my mind, particularly problematic from a communications perspective,” Philadelphia Federal Reserve President Charles Plosser told a business audience. “Monetary policy should be contingent on the economic environment and not on the calendar.”
…

http://finance.yahoo.com/news/russia-admits-brief-cut-gas-141236241.html;_ylt=AtMoSrazSvqeMpGaJ7FLaj2iuYdG;_ylu=X3oDMTNyYTk4MzYwBG1pdANGUCBUb3AgU3RvcnkgTGVmdARwa2cDMzcwNjRmNGQtNmVhMi0zMzMwLThhZmYtMTgwN2NjNTk0MjU4BHBvcwM0BHNlYwN0b3Bfc3RvcnkEdmVyA2U3ZGM1MjcwLTRmNDEtMTFlMS1iMmJmLWI0ZGZkZjI4Y2VjMQ–;_ylg=X3oDMTFvdnRqYzJoBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3NlY3Rpb25zBHRlc3QD;_ylv=3

Just when the Europeans start wringing their hands about Russia and China vetoing the condemnation of Syria’s escalating use of force in trying to quell a growing insurgency, Russia provides an unsubtle reminder that it has the EU snivelers by the cajones. Wonder when China, which is sitting on trillions in US dollar denominated holdings, is going to send a similar reminder?

You know what today is folks! Just 6 hours from now, after the obstructionist that is the Super Bowl is in the rear view mirror, we can finally get back to this country’s true past time…selling each other houses! It’s what a recovery craves!

http://www.telegraph.co.uk/finance/financialcrisis/9062897/Greece-falters-in-debt-talks-with-creditors.html

Along with the NAR’s oft-promised Spring Miracle Revival in home sales (which even their fudged statistics can’t quite deliver), now we have yet another “Greek bailout talks falter” headline after relentlessly upbeat MSM assurances that a successful conclusion was “very, very near” and the rigged Ponzi markets rallied on HFT algo trading. More can-kicking to follow, with the Fed and IMF (US taxpayers funding 17% of the latter’s budget) continuing their stealth bailouts of the Eurotrash banksters to delay the financial reckoning day until Obama or Romney are safely installed in office for another four years.

The good news: Stocks have the best start this year (2012) so far since 1987.

The bad news: In 1987, stocks had one of the worst ends to the year since 1929. But perhaps there is nothing to worry about now, as there was a crash in the long-term bond market in the first half of 1987. Presumably with the Fed planning to execute QE3, this can’t possibly happen again now.

Feb. 4, 2012, 12:00 a.m. EST
U.S. stocks follow win streak with focus on Europe
Cisco, Coca-Cola Disney, Visa, more on earnings docket
By Rex Crum, MarketWatch

SAN FRANCISCO (MarketWatch) — Investors in U.S. stocks, which just wrapped up their best start of the year since 1987, are expected to shift their attention next week toward the ongoing euro-zone crisis and earnings reports from bellwethers Cisco Systems Inc. and Walt Disney Co., among others.
…

Oh MERSy…

Financial Services
Foreclosure Settlement Will Settle Nothing
By Shanthi Bharatwaj 02/04/12 - 06:54 AM EST
Stock quotes in this article: BAC, JPM, WFC, C

NEW YORK (TheStreet) — A foreclosure settlement between the banks and the 50 states Monday, if it does finally happen, will likely not have the positive outcomes that investors have been hoping for.

Details of the deal emerging from recent press reports suggests that the states, while requiring banks to address their foreclosure procedures and reduce principal on mortgages, might not grant them any real immunity from future mortgage litigation.

That offers little comfort to investors who have been hoping that the settlement will provide some much-desired certainty on the scale and scope of the mortgage litigation facing banks.

“I am still concerned that the deal may not be as broad-based, or cover as many issues, as companies would hope for,” KBW analyst Fred Cannon said. “A deal without Nevada or California would water down the settlement. And if MERS is up in the air, it is really difficult to have a meaningful settlement.”
…

Got collapsed dry bulk shipping costs?

Tim Worstall, Contributor
2/01/2012 @ 12:40PM
The Baltic Dry Index and Goodhart’s Law

The Baltic Dry Index is stuttering along in the gutter. In the past it’s been a good guide to the level of international trade. So, if the index has crashed, does that mean international trade has tanked and the entire global economy is going to hell in a handcart?

Well, no, it doesn’t and the reason can be thought of as a minor corollary to Goodhart’s Law. Which is, as all good little monetarists know (for it’s the reason that certain forms of monetarism don’t work) as follows:

Any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes.

We can also see it as a corollary of the Lucas Critique.

The particular reason here is not quite the same as either of those two well known pieces of economics but close enough that it is analogous. The reason is actually this:

Further, the cost of moving a ship carrying 15-20 thousand TEUs is not much different than that of one carrying 1/10th as many. Once the ship is underway, the fueling cost of the larger ship is marginally higher than that of the smaller. Given the numbers of large ships contracted for and built over the course of the past two or three years, the over-supply of space-aboard-ship is high and is rising. Greed and stupidity have trumped economic wisdom.

Thus, where others are pointing to the weakness in the Baltic Dry Index… it has fallen 11,500 in 2008, to 4,500 in early 2010 to 800 presently!…. as evidence of economic weakness we suggest instead that it is a simple inverse index of stupidity and nothing more. Rather, we count the numbers of TEUs moving through the port facilities around the world as the true signal of economic strength or weakness, and those numbers are rising, not falling. The BFI was a fine index to watch fifteen years ago; it ain’t no more, unless you are trading shipping owner’s greed and stupidity.”

The BDI measures the price of shipping something, not the volume being shipped. Sure, with a static supply of shipping then an increase in the amount being shipped should lead to an increase in the prices of shipping something. But change the supply of shipping and that’s no longer necessarily true, is it?

Which is where we really are in Goodhart territory. If you looked only at the BDI then you would think that the volume of world trade has tanked. But that ain’t so: it’s the price of it that has, the volume is doing just fine.

Baltic sea index slumps to 25-year low
Wed Feb 1, 2012 12:45pm EST

* Capesize earnings stays below operating cost level

* Main index falls below levels seen during 2008 turmoil

By Jonathan Saul

LONDON, Feb 1 (Reuters) - The Baltic Exchange’s main sea freight index, which tracks rates to ship dry commodities, fell to a more than 25-year low on Wednesday as a slump in cargo business and a mounting glut of vessels battered sentiment.

The overall index fell 18 points or 2.65 percent to 662 points, falling below the 663 point low hit on Dec. 5, 2008 during the financial crisis and its lowest since 1986.

“Despite the return of Chinese players from holidays, fixture activity has so far failed to recover,” RS Platou Markets analyst Frode Morkedal said.

“We note almost non-existent spot bookings in line with the past weeks, likely a result of a wait-and-see stance being adopted by charterers. Tonnage lists continue to expand, postponing any major recovery in rates.

The shipping sector in coming months is expected to face a supply glut and glum economic outlook, including concerns over Chinese demand for raw materials, which will pressure earnings.

Weather and other disruptions in Australia and Brazil last month together with slower restocking due to an earlier Lunar New Year holiday in China this year have hit cargo activity in recent weeks.
…

The U.S. housing market is far from the only slice of the global economy currently suffering from a massive supply glut.

Commodity Shipping Costs Slump to Lowest in Quarter Century on Vessel Glut
By Michelle Wiese Bockmann - Feb 1, 2012 10:16 AM PT

Commodity shipping costs slumped to the lowest in a quarter century as a glut of new carriers overwhelmed demand at a time of slowing global economic growth.

The Baltic Dry Index (BDIY), a measure of costs across four vessel sizes, retreated 2.6 percent to 662 points today, according to the London-based Baltic Exchange, which publishes rates across more than 50 maritime routes. The gauge fell 61 percent this year and is now at its lowest since August 1986. Rates for Capesizes, the largest iron ore and coal carriers, dropped 84 percent since mid-December.

The decline in rates is masking gains in world trade, with London-based Clarkson Plc, the world’s biggest shipbroker, predicting record cargoes of everything from iron ore to oil. The International Monetary Fund expects a third annual gain in world trade as economies recover from the worst global recession since World War II. About 90 percent of trade moves by sea, according to the Round Table of Shipping Associations.

“The biggest problem is that the fleet is continuing to expand like there’s no tomorrow,” said Sverre Svenning, director of research at Fearnley Consultants AS, a unit of Oslo- based shipbroker Astrup Fearnley. “We’ve seen that the imbalance between demand and supply has just kept increasing.”

The fleet of dry-bulk commodity carriers will expand 14 percent this year, compared with a 3 percent gain in seaborne volumes of minerals and grains, according to Clarkson. Yards delivered 146 dry-bulk carriers last month, an all-time high, Svenning said. The IMF cut its 2012 forecast for global economic growth on Jan. 24 to 3.3 percent from 4 percent.
…

Losses of Japanese Electronic Firms Worsen
By Mariko Yasu and Naoko Fujimura - Feb 5, 2012 6:44 PM PT

Japan’s biggest makers of phones, televisions and chips say they’ll lose about $17 billion this year, about three-quarters of what Samsung Electronics Co. (005930) will spend on research to lengthen the lead over its competitors.

Sony Corp. (6758) more than doubled its annual loss forecast for the year ending March 31 as it announced a new chief executive officer, while Panasonic Corp. (6752) and Sharp Corp. predicted the worst losses in their histories. Their combined losses compare with the $22 billion that Samsung, Asia’s largest consumer- electronics company, said it will invest in capital expenditures.

Japanese companies hurt by a stronger yen, flooding that swamped Thailand factories and weaker demand for their TVs may not be able to regain ground lost to Samsung and Apple Inc. That’s prompting Sony and Panasonic to focus on sectors including medical devices, solar panels and rechargeable batteries in an effort to revive earnings.

“Japan’s consumer-electronics makers are in a total breakdown,” said Masamitsu Ohki, a fund manager at Stats Investment Management Co., a Tokyo-based hedge fund. “They need to compete with ideas, not technology.”
…

Greece is still sliding along the knife’s edge as I type…

Euro Declines as Greek Debt Stalemate Increases European Crisis Concern
By Masaki Kondo and Kristine Aquino - Feb 5, 2012 6:07 PM PT

The euro weakened against 12 of its 16 major counterparts before Greek leaders respond today to demands by international creditors on economic measures.

The 17-nation currency slid versus the dollar with France set to sell as much as 8.5 billion euros ($11 billion) of bills today. The dollar maintained a two-day gain versus the yen before St. Louis Federal Reserve President James Bullard speaks amid speculation the U.S. central bank will avoid easing monetary policy further. Australia’s currency retreated for the first time in five days after government data showed the nation’s retail sales unexpectedly declined.

“The movement in euro is directly related to the concerns in the market that Greece may not get an agreement,” said Emma Lawson, a currency strategist at National Australia Bank Ltd. in Sydney. “There is some hesitation in the currency market” ahead of today’s response.

The euro fell 0.4 percent to $1.3111 as of 10:45 a.m. in Tokyo from the close in New York on Feb. 3. It lost 0.4 percent to 100.37 yen. The dollar was little changed at 76.55 yen after gaining 0.5 percent over the previous two trading days.

Greek political-party leaders must provide a first response to demands by the European Union, European Central Bank and International Monetary Fund on economic measures, including wage cuts, by 11 a.m. local time today, a spokesman for the biggest party, Pasok, told reporters in Athens.

Prime Minister Lucas Papademos struck a tentative deal with party leaders to extend spending cuts after euro-area finance chiefs told them an increase in the 130 billion-euro aid package wasn’t forthcoming.
‘Declaration of Bankruptcy’

“If we determine that it’s all going wrong in Greece, then there won’t be a new program — and that means in March you’ll have a declaration of bankruptcy,” Luxembourg’s Jean-Claude Juncker, who chairs euro finance meetings, told Der Spiegel magazine in an interview published yesterday.
…

Some Cheerful news:

http://www.wnd.com/2012/02/ayatollah-kill-all-jews-annihilate-israel/

Maybe now we Americans will find the guts to fight a religious jihad ..aim at de mosques that’s where the evil is…

The Wall Street Journal
Shaky Profits Threaten U.S. Stock Rally
Margins Are Slipping as Cost Cutting Gets More Difficult at Already-Lean BY JONATHAN CHENG

One of the legs under the stock market’s rally is getting wobbly.

Even as U.S. stocks reach multiyear highs, some investors are questioning whether the recent strength will persist amid global economic uncertainty. One key concern: The corporate profits that have underpinned rising share prices are showing signs of flagging.

Since falling to its crisis lows in March 2009, the Dow Jones Industrial Average has rocketed 95% higher, thanks in part to a surge in corporate earnings that is now entering its fourth year. On Friday, the Dow hit its highest level since May 2008 after unemployment numbers that pointed …

Other than showing that parents of babies are chronically broke, what does the Huggies index show about inflationary pressure?

Huggies Price Cut Shows Why Bond Market Backs Bernanke QE3
By John Detrixhe and Cordell Eddings - Feb 5, 2012 6:29 PM PT

Ben S. Bernanke, chairman of the Federal Reserve, said that he’s considering another set of purchases. Photographer: Joshua Roberts/Bloomberg

Procter & Gamble Co.’s failure to raise the price of Cascade dishwashing soap shows why investors are buying Treasuries at the lowest yields in history, giving the Federal Reserve more scope to boost the economy.

The world’s largest consumer-products company rolled back prices after an 8 percent increase lost the firm 7 percentage points of market share. Kimberly-Clark Corp. (KMB) started offering coupons on Huggies after resistance to the diapers’ cost. Darden Restaurants Inc. (DRI) raised prices at less than the inflation rate as patrons order more of Olive Garden’s discounted stuffed rigatoni than it anticipated.

Low inflation has continued to boost demand for Treasuries, keeping rates low as President Barack Obama finances a $1.1 trillion budget deficit to boost an economy still growing at rates below the 20-year average. The Fed set an annual inflation target of 2 percent two weeks ago, and policy makers suggested they may conduct a third round of bond purchases under a policy known as quantitative easing.

“Any way you look at it, the Treasury market is still expecting rather benign inflation, and we will be in a low-rate environment for some time,” David Ader, head of U.S. government bond strategy at CRT Capital Group LLC in Stamford, Connecticut, said Feb. 1 in a telephone interview.
…

White House to push housing plan despite Republican opposition
By Vicki Needham and Peter Schroeder - 02/05/12 07:00 PM ET

The White House has recently promised major steps to boost the housing market and help struggling homeowners, but bruising fights with Congress loom over major pieces of the plan.

The housing market is widely seen in Washington as still struggling in the wake of the subprime mortgage crisis, and weighing down what would be a more robust economic recovery.

In recent days, the White House has made a concerted effort to address the housing sector, rolling out new plans to help homeowners avoid foreclosure and boost the housing sector.

But while the administration can nibble around the edges and implement changes, it needs Congress and regulators to get on board with any major initiatives, and this presents significant challenges.

President Obama is calling on Congress to pass legislation to establish a streamlined refinancing program that would be open to most borrowers, specifically those who don’t hold government-backed loans. The program would permit people who are current on their payments, especially those whose houses are “underwater,” to refinance their mortgages, allowing them to save up to $3,000 a year by taking advantage of lower rates.

By expanding eligibility, about 3.5 million additional borrowers can take advantage of the refinancing program, Housing Secretary Shaun Donovan said earlier this week.

The White House’s main argument is that economists recognize that a broad-scale refinancing effort “is one of the most important things that we can do not only for families and for the housing market but also for the economy more broadly.”

Here is an outline of the president plan.

However, the costs of that refinancing program — between $5 billion and $10 billion — are supposed to be covered by a new tax on the nation’s largest banks, which would need to be approved by Congress.

But with Republicans running the House, any new tax can be assumed to be dead on arrival on Capitol Hill.

House Financial Services Committee Chairman Spencer Bachus (R-Ala.), who would be charged with steering such a proposal to the House floor, dismissed Obama’s proposal as “not a serious plan to help the nation’s housing market.”

“It won’t pass Congress,” said one financial industry executive of the bank fee. “It’s deader than Julius Caesar.”

Despite the opposition, Donovan said at the White House earlier this week that “the very institutions that made many of these mortgages that caused much of the damage that we’re trying to repair ought to participate in helping to solve it, and we think the bank fee is a good source to do that.”

“If Congress believes that there are other ways that we should look at paying for this, I think we would be open to discussions — as the president has done in other situations, we are open to having a discussion with Congress about the best way to make sure the cost of this is covered,” he said.

Regardless of what Congress needs to pass, Donovan said the administration isn’t going to wait on lawmakers to move forward.

He said most of the president’s proposals — including an investigation into foreclosure and other mortgage abuses related to the housing and financial crises, transitioning foreclosed property into rental housing to help stabilize neighborhoods and boost housing prices, and implementing a new so-called homeowner “bill of rights” — can be done without lawmakers.

“Those are steps that we can take on our own,” he said.

“The steps that we’ve already taken to help Fannie Mae and Freddie Mac borrowers refinance, steps that we will take as part of this to help FHA borrowers refinance, the Homeowner Bill of Rights — and I could go on — all of these are steps that we can take and we are taking, because we can’t wait for Congress on these.”
…

Posted on Sun, Feb. 05, 2012 12:55 AM
Commentary: Federal Reserve deserves closer scrutiny
Glenn Garvin
The Miami Herald

Breaking news: When it came to the collapse of the bubble that touched off the 2008 meltdown of the U.S. economy, the Federal Reserve was a placid herd of clueless blockheads. Less than two years before the housing market turned kamikaze, Fed officials were gathering around conference rooms congratulating one another on what a genius job they were doing managing the economy.

“We are unlikely to see growth being derailed by the housing market,” Ben Bernanke assured the rest of the Open Market Committee, the Fed’s major policy-making group, adding that the nation could expect “a relatively soft landing in housing.” Not that anybody needed much convincing. “We just don’t see troubling signs yet of collateral damage [from housing prices] and we are not expecting much,” declared Timothy Geithner, then head of the Fed’s New York regional bank.

And Janet L. Yellen, boss at the Fed bank in San Francisco, was so pleased with the overall economic picture that she gushed to outgoing Fed chairman Alan Greenspan that “the situation you’re handing off to your successor is a lot like a tennis racket with a gigantic sweet spot.”

All these remarkably unperceptive remarks were made at Open Market Committee meetings in 2006. The reason they’re breaking news more than five years later is that the Fed has only just now made minutes of the meetings public. It’s not like they were lost or anything; the Fed always keeps records of its meetings secret for five years before letting anybody see them.

You might think that when the agency that controls the entire money supply of the United States — an agency that tosses trillions of dollars around like they were rolls of nickels — routinely engages in such pathological secrecy, there would be a public outcry, especially in a Washington press corps that likes to brag about its role as watchdog of American democracy.

Sadly, the truth is quite the opposite. When it comes to the Fed, the press plays more like one of those toy poodles that sits in your lap. Just last week, Washington Post columnist Dana Milbank, who regularly entertains readers with his astounding ability to insert his head further up the digestive tract of the inside-the-beltway establishment than anyone ever thought possible, reached new heights in a paean to the Fed. “Bernanke’s Fed has been a model of good government: apolitical, efficient, brutally effective — and transparent,” Milbank wrote.
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Back in 2006, when some HBB posters were questioning the legality of financing automobiles off the principle balance on newly-originated home mortgages, FOMC members were having a laugh a minute over early warning signs the U.S. housing market was about to collapse. I suppose it could have seemed pretty funny to those who were too clueless to realize what they were witnessing.

Inside the Fed in 2006: A Coming Crisis, and Banter
U.S. Federal Reserve, via Reuters

A Federal Open Market Committee meeting on March 28, 2006.
By BINYAMIN APPELBAUM
Published: January 12, 2012

WASHINGTON — As the housing bubble entered its waning hours in 2006, top Federal Reserve officials marveled at the desperate antics of home builders seeking to lure buyers.

The officials laughed about the cars that builders were offering as signing bonuses, and about efforts to make empty homes look occupied. They joked about one builder who said that inventory was “rising through the roof.”

But the officials, meeting every six weeks to discuss the health of the nation’s economy, gave little credence to the possibility that the faltering housing market would weigh on the broader economy, according to transcripts that the Fed released Thursday. Instead they continued to tell one another throughout 2006 that the greatest danger was inflation — the possibility that the economy would grow too fast.

“We think the fundamentals of the expansion going forward still look good,” Timothy F. Geithner, then president of the Federal Reserve Bank of New York, told his colleagues when they gathered in Washington in December 2006.

Some officials, including Susan Bies, a Fed governor, suggested that a housing downturn actually could bolster the economy by redirecting money to other kinds of investments.

And there was general acclaim for Alan Greenspan, who stepped down as chairman at the beginning of the year, for presiding over one of the longest economic expansions in the nation’s history. Mr. Geithner suggested that Mr. Greenspan’s greatness still was not fully appreciated, an opinion now held by a much smaller number of people.

Meanwhile, by the end of 2006, the economy already was shrinking by at least one important measure, total income. And by the end of the next year, the Fed had started its desperate struggle to prevent the collapse of the financial system and to avert the onset of what could have been the nation’s first full-fledged depression in about 70 years.

The transcripts of the 2006 meetings, released after a standard five-year delay, clearly show some of the nation’s pre-eminent economic minds did not fully understand the basic mechanics of the economy that they were charged with shepherding. The problem was not a lack of information; it was a lack of comprehension, born in part of their deep confidence in economic forecasting models that turned out to be broken.

“It’s embarrassing for the Fed,” said Justin Wolfers, an economics professor at the University of Pennsylvania. “You see an awareness that the housing market is starting to crumble, and you see a lack of awareness of the connection between the housing market and financial markets.”

“It’s also embarrassing for economics,” he continued.
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The old advice to watch out what you wish for seems to have bit the Fed in the back of the neck.

FT dot com
January 12, 2012 6:22 pm
Transcripts show Fed wanted housing slowdown
By Robin Harding in Washington

The US Federal Reserve fretted about a slowdown in housing in 2006, but never considered the possibility that it could cause a financial crisis, according to complete transcripts of that year’s meetings.

Almost every Fed policymaker concluded that weaker housing would cause a slowdown in consumption and investment, but expected that to offset strength elsewhere in the economy, leading to continued growth overall.

“Housing is the crucial issue. To get a soft landing, we need some cooling in housing,” said Ben Bernanke, Fed chairman, in his summing up of the economic situation in March 2006. “I think we are unlikely to see growth being derailed by the housing market.”

The transcripts, released on Thursday, highlight the failure of the Fed – one matched by most other central banks, commentators and economists around the world – to spot dangers to the financial system from subprime mortgage lending. That complacency set the stage for the devastating crisis that began in the summer of 2007.

Throughout 2006, Fed officials were aware that a sharp slowdown in house building and sales was under way. “Even the Carolinas are starting to fold over, and the weakest area is California,” said Richard Fisher, Dallas Fed president, at the August meeting. “The big five builders and other homebuilders are reacting as you might expect. They are cutting staff.”

Indeed, a number of Fed officials saw the housing slowdown as welcome news that would help resolve a potential threat to the economy.

“As to housing, we are in fact, as all have noted, squeezing out of that sector the speculative excesses that developed with the low interest rates of recent years – and doing so is unavoidable if we want to correct the sector,” said Thomas Hoenig, then president of the Kansas City Fed, at the September 2006 meeting of the FOMC.

Fed officials made special efforts to talk to housebuilders, reflecting their fears about investment and consumption, but there is little evidence that they looked at where the credit to support the previous housing boom was coming from.

“Predatory lending is rearing its head at the lower end of the scale, and it’s something we have to continue to watch for. However, before I leave housing, let me just say that the bottom line is that overall mortgage credit quality is still very, very strong. We’re seeing predatory lending only in pockets of the market,” said Susan Bies, another governor, at the September meeting.
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