‘Housing Market Is Cooling’: Bernanke
Some housing bubble reports from Wall Street and Washington. “The housing market, after flying high for five years, has lost altitude and appears headed for a safe landing, Federal Reserve Chairman Ben Bernanke said Thursday. ‘It seems pretty clear now that the U.S. housing market is cooling,’ Bernanke said.”
“On the issue of risky home mortgages, Bernanke pointed out that the Fed has issued some guidance for lenders. ‘We’re not saying you shouldn’t make these loans. What we’re saying is that they be done the right way,’ Bernanke told the banking conference.”
“‘We do have some concerns about the non-traditional mortgage lending,’ he said. Mr Bernanke noted that some of these products had previously been the preserve of wealthier borrowers, but were being increasingly extended to lower-income buyers.”
“The Federal Reserve is less likely to suspend its interest-rate increases after a report yesterday showed consumer prices rose more than expected, according to Richmond Fed President Jeffrey Lacker. ‘The inflation outlook is at the borderline of acceptable and perhaps moving beyond,’ Lacker told reporters. ‘In circumstances like that, containing inflation has to be the primary focus.’”
“‘Core CPI is clearly running near or above the upper end of the FOMC’s comfort zone,’ former Fed governor Laurence Meyer said yesterday. ‘We now expect the committee to move to 5.25 on the funds rate’ in June.”
“A Federal Reserve economist on Thursday will say Fannie Mae and Freddie Mac help lower U.S. mortgage rates by only two basis points, below his previous estimate of seven basis points, sources said. Critics of the shareholder-owned but government-sponsored enterprises argue that they benefit in financial markets from implicit government backing, but do not pass that benefit on to homebuyers.”
“Due to Wall Street’s belief that the federal government would bail the companies out in a crisis, Fannie and Freddie can borrow at lower rates than other companies.”
“The suggestion that the companies fall short in their primary task of promoting homeownership comes as Congress considers toughening oversight after multibillion-dollar accounting problems at both Fannie Mae and Freddie Mac.”
“Hooker Furniture Corp. said it expects lower fiscal second-quarter sales than it previously forecast. ‘A softening in business at retail has dampened our expectations for the current quarter,’ said Paul Toms Jr., chairman and CEO. ‘We believe this decline has been precipitated by rising energy prices and a decrease in housing activity.’”
“Shares of Clayton Holdings Inc., which analyzes mortgage loans for mortgage-backed securities traders, fell in afternoon trading Wednesday after an analyst said the company is vulnerable to a downturn in the cooling real estate market.”
“While Jeffrey has a positive outlook for the future of the mortgage loan market, the company is exposed to a downturn. Softening real estate prices and rising interest rates pose risks not currently reflected in Clayton’s share price, Jeffrey said.”
“‘Clayton has never operated through a significant down cycle or a period marked by limited liquidity or less-ready access to the capital markets,’ analyst Andrew Jeffrey wrote. ‘It is our opinion that a financial market disruption and/or a sharp rise in interest rates over a short period of time, accompanied by declining real estate values, could cause such a disconnect.’”
“Jeffrey also cited concerns that management was hastily assembled and has not had enough time to gel and familiarize itself with the company and its market. Executives also do not have significant personal equity ownership in the company, Jeffrey said.”
“Clayton provides transaction services such as loan analysis and home value validation for traders in the market for mortgage-backed securities, especially home loans known as ‘non-conforming mortgages.’ In 2005, the company analyzed 930,000 non-conforming loans totaling more than $175 billion in principal, or 9 percent of the total non-conforming mortgage loan originiations in the period.”
“As of the end of 2005, the company was monitoring $308 billion in loans underlying mortgage-backed securities, or 19.4 percent of the total non-agency mortgage-backed security principal.”
My money is that Bernanke is very worried about the housing market and is choosing his words very carefully as to avoid another uproar.
Greenspan knew what was going on as well. He made comments about the ‘froth’ in the market yet everyone eviscerated him for his recommendation of ARMs to those who are financially savvy. His call was not an invitation to the masses to spend themselves into perpetual serfdom.
he really can’t come out and say “the housing market is collapsing” even if he really believes it is. to do so would be diplomatic and political suicide.
sometimes I think Greenspan intentionally bailed out when he did so somebody else could take the fall for this monstrosity.
“To do so would be diplomatic and political suicide.”
I, for one, have no problem with the concept of seppaku.
And do you have a plan to make it fashionable again?
Nah, I’m just being dramatic. Seppaku had its time and place and those days are long gone. My agreement is mostly in the concept. There are worse things in the world than losing face, but there is nothing better than being honest.
Sorry about the correction. It’s just that “seppaku” means “imminent” - though arguably a good word for this situation, too!
Helicopter Ben is doomed regardless of his actions. History has not been kind to new Fed Charmains going back some 50 years. Each time a new Chairman is appointed,there is a recession within 18 months. This will be no exception.
Couple BB with an out of control Congress and Administration that spends $$$ like a drunken sailor, a negative savings rate, a plunging dollar, runaway inflation, a housing bubble that makes the stock market bubble look like a pimple, fraud in the GSE’s of epic proportion, and the global uncertainties of oil and terrorists, we are in for a very rough patch ahead.
Nicely struck, BigDaddy!
I doubt it had anything to do with the fact that he was 79 years old.
(Remember what John McCain said? “”I would not only reappoint Mr. Greenspan, if Mr. Greenspan should happen to die — God forbid — I would do like we did in the movie, ‘Weekend at Bernie’s.’ I’d prop him up and put a pair of dark glasses on him and keep him as long as we could.”)
Do you happen to have the exact quote of Greenspan’s comments on ARMs? My memory is that is was directed to everyone, not just the financially savvy.
It was directed at everyone as a “good deal”.
From his February 2004 speech:
“American homeowners clearly like the certainty of fixed mortgage payments. This preference is in striking contrast to the situation in some other countries, where adjustable-rate mortgages are far more common and where efforts to introduce American-type fixed-rate mortgages generally have not been successful. Fixed-rate mortgages seem unduly expensive to households in other countries. One possible reason is that these mortgages effectively charge homeowners high fees for protection against rising interest rates and for the right to refinance.
American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage. To the degree that households are driven by fears of payment shocks but are willing to manage their own interest rate risks, the traditional fixed-rate mortgage may be an expensive method of financing a home. ”
I will not mince words here: I believe Greenspan’ made one of his biggest mistakes ever with that speech — and thousands upon thousands of homeowners are going to lose their homes partially as a result. While no Fed chairman would EVER come out and say “you should take out an ARM right now,” this speech was as close to an “endorsement” as Greenspan could have given. At the time, I believe the Fed was concerned the rest of the economy was not picking up the slack from a housing market that had gone as high as it could with fixed rate financing. This was Greenie’s way of juicing the market a little more to give businesses time to boost spending. And just like Greenspan’s speech praising the new economy in early 2000 right before the biggest Nasdaq crash in history, his “call to ARMs” was the worst possible advice at the worst possible time.
Again, the Fed doesn’t say anything unless there’s a reason. And it is my firm belief that this was essentially a promotion of ARMs at quite possibly the worst point in the interest rate cycle (short-term rates, which ARMs adjust to, began rising a few months later after the Fed started raising the FF rate). It certainly prompted lenders to get more “creative” with their financing — and now, in one of the cruelest ironies of this whole bubble mess — the federal regulators INCLUDING the FED ITSELF are lamenting how much risky mortgage lending is out there. What a bunch of ingenuous morons!
should be “disingenuous” morons. My bad for that typo.
It certainly caused me to lose all faith in the Fed and government in general. If he can get away with saying this, they can get away with pretty much anything. Forget WMD. Forget what “is” is.
That could not have been a mistake. It was criminally misleading in my opinion.
You better believe it was. ARM’s at a time of historically low interest rates? I was e-mailing those remark around to everyone I knew at the time. It was the height of corrupt self-serving hype. Greenspan should eternally be ashamed for stooping that low to save his own a$$.
Asking average Americans to “manage their own interest rate risks” is laughable. Most have a hard enough time managing their credit card debt.
Greenspan was exactly right, a great number of bondholders collected very rich fees for the exceedingly high premiums associated with the call option on a mortgage. His timing could have been a bit better (ARMs might not be ideal at record low rates) but the general trend has been that over a longer period of time the savings on the spread in interest rates far exceeds the cost of the additional interest during peaks.
I have a different take on Greenspans push for adjustables .
Banks in the late 70″s starting refusing to make fixed rate loans on a 30 year note . They had to many low interest rate loans on the books yet they had to pay the depositers high interest rates . The secondary market didnt want to invest in fixed rate loans at a low rate for 30 years .Would you tie your money up at a low rate for 30 years ? Finally they came up with the adjustable . The secondary market started buying the loans again ,
The money market wants the loans to adjust with the market so they don’t lose money like the banks did in the 70’s .
Greenspan wanted to encourage the market but insure financial health for the banks/funders/retirement funds should interest rates go up in the future by higher yield requirements by banks and secondary market .
Anybody who got a fixed rate note at these lower rates has a great loan .
And I have yet another take. AG is a mainstream economist, and part of the religious doctrine with which mainstream economists are inculcated in graduate school and which is often subsequently repeated at testimony meetings is that consumers are better off if they have a wider selection of products from which to choose (did you ever hear of a book called “Free to Choose,” by Milton Friedman?). I believe that his comments were a reflection of this doctrine, which can potentially result in big gains in well-being for a world full of well-educated, wealthy folk who are sufficiently astute to make financial decisions which balance risk against means. Unfortunately, the message trickled down to lenders willing to make loans to low-income subprime borrowers who now constitute a massive iceberg of risk for the credit market. I bet AG kicks himself every night for this severe distortion of his intended message.
I agree GetStucco AG’s messages were distorted ,and I’m sure he has sleepless nights over it .
Housing wizard, the idea of banks not wanting to take out 30 year loans at low rates doesn’t make much sense to me. If they aren’t willing to make the loans the rates would rise. If the secondary doesn’t want the low rate loans then they won’t buy them and thier price will fall and yields will rise until somebody is willing to buy them. The market sets the rates for long term loan products.
Yes but the banks in the late 70″s got stuck holding the bag on a hugh amount of fixed rate notes and it was killing them . I agree that the market sets the rate ,but the investors sometimes decides in a second they don’t want to buy .
Northern VA
The problem described is what caused the S&L scandal. The things that came before congress were much easier to explain to congresspeople than duration risk and implied call options.
Everyone forgot that the Fed and Greenspan work for the BANKS not the [ublic. His job was to shift the risk from the banks ( fixed rate) to the public( ARM). He shifted the interest rate risk at the lowest point in the interest rate cycle-why? He is supposed to be the smartest economist in the world. What could be a logical reason for such a foolish move other than to help the banks out?
I have long said that AG was one of the worst Fed Chairmans ever. He engineered several recessions and stock market crashes. A chimp could have simply printed the amount of dollars he did and produced the same results. He took credit for the heavy lifting by his predcessor Volker and had the benefit of rates dropping from the high teens to almost zero. Yet he still managed to expand devalue the dollar some 80%. His hypocracy (sp) was evident a mere month after he left office when he suddenly had the revelation that the deficit was out of control, the economy on edge, consumers overextended, and the housing market was frothy. Yet HE was the one that created this mess.
The man was the consumate con artist and snake oil salesman. Now he will be paid some $100,000 per speech and retire on the millions he socked away over the years on the government’s tab.
AG used to be for a gold standard in his younger days for the very problems he created. No one listened. He became Fed Chairman and now people get to live it. Lucky us.
Mike — I agree 100%. Thanks for retrieving the quote.
http://tinyurl.com/ptw3d
The FED knew exactly what it was doing in creating this asset bubble, they were well aware of potential problems yet they opened the liquidity gates.
Many on this site have wondered about the M3 numbers they are available as MZM (Month to Zero Maturity at http://www.Economagic.com)
I have included a link from Fiendbear (a cool site) with the MZM graph. http://tinyurl.com/nay4x
Now for the FED minutes
In the FOMC meeting minutes from March 22, 1994, Greenspan says :
“When we moved on February 4th, I think our expectation was that we would prick the bubble in the equity markets. What in fact occurred is that, as evidence of the dramatic shift in the economic outlook began to emerge after we moved and long-term rates began to move up, we were also clearly getting a major upward increase in expectations of corporate earnings. While the stock market went down after our actions on February 4th, it has gone down really quite marginally on net over this period. So what has occurred is that while this capital gains bubble in all financial assets had to come down, instead of the decline being concentrated in the stock area, it shifted over into the bond area. But the effects are the same. These are major capital losses, which have required very dramatic changes in the actions and activities on the part of individuals and institutions.”
“So the question is, having very consciously and purposely tried to break the bubble and upset the markets in order to sort of break the cocoon of capital gains speculation, we are now in a position—having done that and in a sense succeeded perhaps more than we had intended—to try to restore some degree of confidence in the System.”
Caution PDF http://tinyurl.com/ptw3d
Are you suggesting that the last 10 years growth and prosperity in the USA was because of increase in MZM? Or MZM has been catalist for the gorwth.
Another thing I don’t undrestand is why this bloated liquid capital has not caused any significant inflation?
You are confusing monetary inflation( increasing the amount of $$$ in the system) with price/cost inflation.
There HAS been HUGE inflation in the last 10 years. Look at the value of the dollar now vs. ten years ago. You can get inflation by either raising the price 80% or having the dollar devalue 80%. IT achieves the same goal. What has happened is that all of those years of flooding the world with dollars is coming home to roost and now we are going to suffer from the inflation that you see- hence why commodities are going wild. The world realizes that the dollar no longer is worth the paper it is printed on. The world is now going to use the euro or the yen as the benchmark. Hell they might even use the yuan(sp).
No country in the history of the world had ever managed to survive with a debt/ GDP at 7% like we have. No other major industrialized country has a negative savings rate.
SInce we went of the gold standard in I think 1971?, the $ has lost over 95% of its value. That is inflationary. If you look at a chart of inflation for the U.S., I believe it averaged around 3% for the first 200 years. Now it is about 6% for the last 30, thanks to deficit spending and the fact that the government can simply print as much money as it wants and doesn’t have to worry about backing it with gold.
We are a broke country with a fiat currency.
Thanks BigD. I totally agree that we are a broke country. Thanks to our last presidents and particularly current president our national debt has been sky-roketting. This much debt posses a national security problem.
Imagine that one Monday morning you hear that China has surrendered Taiwan with it navy and wants to annex Taiwan. Naturally, the U.S. is going to do something about it.
But the China tells to us “ if you guys interfere then we will dump you bonds and crash your currency”. you see my point.
Why our leaders do not have any wisdom? Can someone tell me that?
Good point
taiwan doesn’t worry me. what happens when china moves into venezuela, or mexico? china already has panama…
Ok - then it was an invitation to the lenders to give money to the masses to spend themselves into perpetual serfdom. Greenspan’s call to ARM’s was a knowingly irresponsible remark that made the collapse of the stock bubble into something that will be inifinitely worse in the end. Greenspan should be put in jail for those comments IMO.
if you read greenspan carefully, he said ARMS in the PAST were good ideas, he said nothing about now. he didn’t say go get an ARM.
please, tell me how his recommendation for ARMs was geared toward the ‘financially savvy’. And how his recommendation, if it were heeded exclusively by the ’savvy’, would have prevented the problems we have today…
I was watching cnn this morning show for a couple secs the other day (as long as I can stand that miles o’brien smugness) and someone was on telling us how to deal with finances and RE at 30 or 40 or 50 yrs old (missed most of it, couldn’t really take it on an empty stomach) and myles said something like “yeah, but you’re only going to be in the house for 5 years anyway”…maybe it was some rec to refi into fixed, or who knows what…
but it made me want to know for how long americans have moved every 5 years, why this is inevitable, etc.
These comments from bernanke scared the hell out of me frankly…
seeing the fed chair say “headed for a safe landing..” like he has some crystal ball or is a shill for the NAR scares me mightily. He’d best get some better smoke&mirrors language ’cause that was too slogan-y. Greenspan’s gobbledygook was much more confidence-inspiring.
I wished he kept the metaphor to froth…froth rises from the top of the beer and settles down and you can still drink it…landings invoke planes and doing unnatural things like gliding without engines and there’s always the possibility of a crash…eek!
And I’d never really gotten til just now that the ‘exotic’ loans used to be the preserve of people with a lot of cash to pony up to the table with if they had to sell at a loss, for whom downturns were totally survivable. Ways to make lots of money with just enough to cover a bad bet perhaps. And now the lenders have gotten populated with enough brokerages who realize the way to make money is to supply the gold-diggers with mortgage docs that they just pass on to the new huge market for those, and all the little guys can play at the same table previously out of their league. O’ course, once *everyone’s* at it, the game changes…
scary…
Bankers use to figure that a high percentage of loans turned over in 7 to 10 years ,therefore they were able to fund a fixed rate note without to much concern that they would be left holding
low paying loan note yields while they had to pay higher CD rates etc. ,if the market changes . Thats why lenders would rather sell their fixed rate notes than their adjustables .
Look out for the helicopters. They are coming. Radar just gave the signal to Hawkeye and BJ.
Look out for the helicopters. They are coming. Radar just gave the signal to Hawkeye and BJ, and Colonel Potter.
Now that the Fed has deemed M3 (money supply) off limits to serfs, how long will it be before the virtual paper that is spewing out of the printing presses show up in the reported numbers (M1 and M2)?
How long? Did you see the latest CPI inflation numbers (running well above BB’s comfort zone ceiling of 2%)?
Any more news on “NewBank” (Our federal reserves paper bank)? Kind of weird how our media does not report on things that really are news breaking.
That’s not true, FOX News has been keeping us informed of the Duke rape scandel 24/7. Isn’t that a good example of investigative journalism at its finest?
Can there be anything of more importance to the American people?
“Can there be anything of more importance to the American people?”
Of course there is! It’s the Natalee Holloway case.
Is Michael Jackson really going bankrupt?
Why are you watching Fox News?
I watch NO television news, though my wife does. I get my news strictly from the Net. Faster, easier, what I want & when I want it, copy- and paste-able, and forwardable. Love it.
‘The inflation outlook is at the borderline of acceptable and perhaps moving beyond,’ Lacker told reporters. ‘In circumstances like that, containing inflation has to be the primary focus.’”
You just have to laugh at this statement. After all the Fed is the creator of inflation, ever since 1913 they have inflated our dollar away to nothing. The Fed wants to give the impression that their activities are the solution to fighting inflation. And for the most part they succeed because the public for the most part is ignorant. Buy gold and beat them at their own ponzi money printing scheme. All the Fed talks about is rate hikes, how about giving the printing press a rest or is that too much to ask to fight inflation.
Everyone who hasn’t already needs to go read “What Has Government Done To Our Money” by Murray Rothbard.
Lest readers think this is just a gold-bug plug, Murray Rothbard was an outstanding libertarian economist who explained well why government screws up just about everything it meddles in. Dr. Ron Paul, the (only) congressman I truly admire and to whom I will contribute, follows Rothbardian economics. Both are quoted extensively at Lew Rockwell’s blog.
Stated over and over but still relevant.
If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.
Thomas Jefferson
Why is it that people go nuts over record profits by oil companies but there is rarely a peep of discontent when banks report record profits? The modern financial structure is a ghastly hollow man. Benevolent bankers my ass!!
Notice how in every city the tallest buildings are almost always the banks.
That’s by design. They are supposed to project strength, security, etc. The facades are usually fortress-like, too.
Especially when the “record profits” by the oil companies are only about 10% of revenues. What counts as “outrageous profits” to oil companies is chump change to real estate profiteers these days.
Words of wisdom. The fed can really only do one thing. And thats print money. The Federal Reserve is really more like a “Confidence Man”. Greenspan was an expert at fed-speak. The plain English explanation of the Federal Reserve is “when the economy slows, we PRINT money… when the economy speeds up too fast, we PRINT less money…”.
In some ways, I agree with the RE speculators. In many ways, they act like members of our priveldged Banking elite. They borrow money and thru the magic of fractional reserves, the have a license to make hoardes of money with little down. The flippers only risk is Bankruptcy, which if they don’t have any assets, why not flip houses? Banks will lend anyone money.
We all know the fed will inflate. So long term any tangible asset will go up in dollar value. In this case, I think it encouraged rampant speculation. Problem is, how do you know when housing is again “reasonably” priced.
Well that is the question at this point in the cycle. Is price equal to value or is value disconnecting from the price? I think that most folks on the blog are stating that prices are not supported by the underlying value of the housing stock. Only time and the sound of choppers, or lack thereof, will be the determinant factors in the continuation of housing being a driving economic force.
Did you know that the dollar as defined is 100 cents and that one cent is 1/100 of a dollar? It would seem pretty tough to determine value on a long term basis with an exsistential tautological monetary unit. Thank god for computers!!!
Well in this case, 100 pennies is greater in value than 1 dollar. Happened before in the late 1970’s. Maybe they can just make the penny physically smaller. Or revert back to the steel cent! Maybe use tin, I think that is even cheaper. LOL.
You know it just clicked in my little brain that we still do have a commodity based currency because of our coinage, in function if not in law! DUH! Gold debased to silver debased to copper debased to zinc debased to ?
LOL! Time to start clipping your pennies!
“Zinc is money!”, the new rallying cry of zinc bugs everywhere!
Should we all start demanding to be paid in coin? LOL. You’d think zinc would be pretty damn cheap.
Are those 200 rolls of pennies in your pants or are you just happy to see me?
“… how do you know when housing is again “reasonably” priced.”
For me it will be Reversion to the Mean — when house prices are what they were around 1999. There will be some differences in opinion and by region even among Reversion believers, but I’d think no earlier than 1997 and no later than 2001 in any area in the U.S. What rose most will fall most; what rose least will fall least. The only glitch is the exacerbation of indebtedness caused by HELOCs and cash-out re-fi’s, as taken by those who did not then speculate in additional real estate purchase; my own impression is that these will cause the reversion to push prices, temporarily, below the “mean” line. Waitin’. Watchin.’ Got cash.
What choices does Bernanke have?
If he stops raising rates, the dollar risks losing its status as the de facto currency for international trading. It’s the first time in history the dollar is facing a strong competitor, euro, for that status. Can the US afford to lose that?
If BB chooses that route, we’ll see hyper inflation in the US.
No one is going to sell oil, gold, or virtually anything for the dollar, at least not at current prices. All the imports will see at least 30%/year inflation, as the US has to use gold or euro to buy fuels and other imports and that will make dollar even less attractive and push the dollar into a downward spiral.
He can’t print more money out of this mess, as it’s going to make the inflation and the free-falling of the dollar even worse.
Seems that the only option is high interest rate with restricted money supply, but we all know what that will do to the RE markets.
I don’t think they’ll inflate (see goleta’s post below). Inflating out this situation would be greater of two evils and still won’t save the housing market and would do far more damage to the overall economy. It’s better to just let the FB’s and stupid banks burn at the stake of rising interest rates. Controlled damage so to speak.
It’s like the movie Outbreak - blow up the town of thousands of people to save the lives of millions. We all know what the government will choose.
JWM-
I disagree. When you’re buried in debt, inflation is your best friend. A huge devaluation of the $US would hurt in the short term, but would be good for the country in the long term. Might become profitable for the US to actually make products and export them.
You cannot move manufacturing overnight on a turnkey basis. In addition most of the currencies are held steady relative to the dollar so any devaluation of the currency makes little difference, other countries will correspondingly devalue. For instance, China has pegged the RNB at 8 for a dollar. Do you think that they will allow the Ben to piss away 800 billion of thier reserves by a devaluation? IMHO not likely.
They have recently let the renmibi appreciate beyond their peg.
The Argentina scenario (currency devaluation followed by severe domestic economic hardship due to loss of credit rating in the international capital markets destroying import purchasing power) is far less attractive than the Volcker scenario (surprise every fool on Wall Street by ending the conundrum through interest rate hikes to a level which revives risk premiums on defends the $US’s reserve currency status).
The tricky part is the timing — go to fast and you make risky assets (stocks, bonds, housing) crash hard; too slow and the bond market will take matters into its own hands, with the rise in long-bond yields spinning out of control. Let’s hope for a continuation of the measured (0.25%) FF hikes for a bit longer…
As I posted on Bubblemeter,– I hope Bernanke yells soft landing until the cows come home. That just means he’s not gonna stop raising the FF rates just to save it. I am not sure if he’s deluded himself into actually believing that it’s gonna be a “soft landing”, or if he’s saying that to give everyone a heads up that even in the face of all the data indicating a pretty severe slowdown in sales volumes all over the country,it’s not enough to overtake inflation concerns, and so housing is toast. I guess you could call that Fedspeak for “Sell now while you can!”?
He’s saying it because he was appointed by Bush and is spinning the spin.
I found it! The video of the coming soft landing…
Wow. Sucks to be in the back of that plane.
“Seems that the only option is high interest rate with restricted money supply, but we all know what that will do to the RE markets.”
Bring on the pain.
‘The inflation outlook is at the borderline of acceptable and perhaps moving beyond,’ Lacker told reporters. ‘In circumstances like that, containing inflation has to be the primary focus.’”
Bernanke had telegraphed that he might pause at the next meeting, but now he can’t. The stock market, bonds, and even the dollar all reacted to the new knowledge that he has no option on his next move. He is trying to buy a little slack by calling attention to the cooling housing market.
Interestingly, the bond vigilantes awakened from their long slumber on the inflation news. It has actually been years since they were last seen thrashing a central banker about the head and shoulders. Bernanke is living in interesting times, as are we all.
Bond vigilantes????
there’s only a 14 bp term premium (10s v 2s) in the bond market right now and ten yr is rallying hard today. The bond market is telling us that we’re going into a recession if (or should I say “as”) the Fed continues to tighten.
Bond vigilantes are nowhere in sight.
The only time they came out was yesterday, on the inflation news. I agree that the yield curve is tight enough to be suggesting a recession beginning around Winter. But Bernanke has to realize at this point that if he doesn’t tighten, the bond market will take matters out of his hands.
Fair enough. The bond market won’t give the Fed any breathing room as signs of inflation persist because the Fed already seems like it’s behind the curve. But I don’t think we can look at a yield curve as flat as this one and say that there’s a a complete lack of faith in the Fed.
OT, but did the PPT take the afternoon off today? They were doing a great job until just the last few minutes…
http://www.marketwatch.com/tools/quotes/intchart.asp?symb=26099400&sid=1643&freq=9&time=1dy&siteid=mktw
Bubble stocks are following the broad market’s lead (”Sell, sell, sell!!!”):
http://tinyurl.com/o7skt
I don’t know if anyone posted this yet or not:
http://www.canada.com/topics/news/world/story.html?id=41c3b5c5-a34d-424e-93ae-50d6b1666921&k=70496
Safe landing my ass!!
But what else can he say, in his position? “The housing market has lost altitude and is disappearing from radar…. please make all preparations for emergency landing. Hope y’all were paying attention to that little show and tell at the beginning of the flight. And remember, please, put your own oxygen mask on before trying to help others, including small children.”
Note to FBrs: Your seat cushion may NOT be used as a floatation device incase of an underwater landing.
i picked a bad day to stop sniffing glue!
We’re not saying don’t take out a loan but we’re not saying don’t not take out a loan.
And we’re not saying don’t buy a new house but we’re not saying don’t not buy a new house.
And we’re not saying don’t do a HELOC but we’re not saying don’t not do a HELOC.
And we’re not saying……
news on economic indicators:
http://biz.yahoo.com/ap/060518/economy.html?.v=10
Finally market is anticipating downturn..This week the technical damage was aweful.
Gold is clearly vulnerable here.
Dollar carnage, for the time being, is stalled for all practical purposes.
we’ll see at least 50bps more before the Fed is done, quite possibly 75bps if May and June CPI numbers are anywhere near April’s. we live in interesting times…
I love how Bernanke talks about lending standards. as if them issuing guidance is a big deal.
the horse is out of the barn.
CYA comments.
(The chairman’s comments on the broader US housing market reflect recent comments from housebuilders who expect the current a soft landing from the current boom, similar to the corrections seen in 1994-95 and in 2001.)
first time I’ve ever heard those years mentioned.
OT — sold for way below neighborhood asking price. Story is about Florida in a Canadian news source.
http://www.canada.com/topics/news/world/story.html?id=41c3b5c5-a34d-424e-93ae-50d6b1666921&k=70496
“Recently, three new homes at PGA Village, an exclusive golf community in St. Lucie West, were sold by auction.
Jeff Banack, 38, an investment salesman, picked up a two-bedroom home for US$235,000 plus the 10% buyer’s premium after some intense bidding on a balmy evening. He got a deal.
Al Deleeuw, a builder from Detroit, had two similar houses for sale on the same street for US$350,000 and US$345,000.”
Thanks to wittbelle who published the original link above. Interesting reading.
Some housing bubble reports from Wall Street and Washington. “The housing market, after flying high for five years, has lost altitude and appears headed for a safe landing, Federal Reserve Chairman Ben Bernanke said Thursday.
Safe landing my azz..
Just let those $200k underwater on value eat cake, right King Benny?
Appears headed for a safe landing, but we’re not sure if the landing gear works,the pilot is doing lines of coke off one of the stewardess’ bellies, the runway lights have been turned off, and the air traffic controller just jumped out of the tower. Yeah, it’ll be a safe landing.
It looks like I picked a bad day to stop sniffing glue.
damn, beat me to it… sorry.
safe not soft
new lexicon
10 yr rate says deflation via house crash
Good catch, flat.
Yesterday everything $US denominated dropped relative to the $…
Today the bond market or cash were the only happy places…
The bond market has turned defensive, as though to signal that high bond yields will kill off the stock market a la 1987.
http://www.marketwatch.com/tools/marketsummary/default.asp?siteid=mktw
GetStucco,
If you happen to get back to this post (or anyone who knows for that matter), I need a crash course on the effects of the bond market on what BB is capable of and the FEDs control over inflation.
Thanks.