Weekend Topic Suggestions
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Shaky Cyprus teeters between Moscow and Brussels
And as the latest troubled EU nation hurtles towards a seemingly inevitable financial rescue, it finds itself teetering between Moscow and Brussels.
It isn’t hard to find reasons why Moscow would be willing to be generous - and more lenient with its terms than Brussels.
With its 10 percent corporation tax - the EU’s lowest - Cyprus serves as the perfect off-shore base for Russian money, much of which is then reinvested back in Russia itself, a role it played for wealthy Arabs in earlier decades.
“Cyprus will go for any deal that allows them to avoid changing laws and regulations that make it the tax haven that it is,” said Hubert Faustmann, politics professor at the University of Nicosia.
http://www.reuters.com/article/2012/06/15/us-cyprus-bailout-russia-idUSBRE85E0NR20120615
This brings up a topic I’ve been thinking about. When I do searches for the Friday post, I get an idea of what’s going on by the volume of reports in one area or another. Right now, the global bubble situation is producing a lot of press in Australia, Asia, and Canada. And the rolling bubble effect into the US has the NAR rubbing their hands in glee. Hard to say for sure, but something big could be about to happen.
Australia’s game is to limit the amount of buildable lots so that there is nothing affordable…
America’s game is slowly dribble out a small number of foreclosures so that people are in bidding wars to get them…
It really is beginning to feel like the wheels are about to come off. The real question is what will cause a sea change in the current situation? Political elections, global trade slowdowns, or perhaps global instability come to mind over the next several months.
Hard to say for sure, but something big could be about to happen.
Between the escalating civil war in Syria as a proxy for war with Iran and the heating up of the old cold war against Russia/China, not to mention the Egypt elections thing and Israel beating the war drums, the Middle East is ready to explode.
Then you have the PIIGS of the Eurozone going full retard which doesn’t bode well for China or the US. Bottom line, everyone is scrambling for safety. How do I think this relate to housing? Hard assets…
A couple of questions:
When has the middle east been in this much turmoil and oil prices declined significantly? Oil is telling us something…
When has there been this much turmoil and uncertainty in a global economy and gold declined in value? The price of gold is telling is something…
In both cases, I think it is Seinfeldesque Bizzaro World logic where what should go up is going down, whether due to manipulation or because market participants are discounting things we’re not aware of. Or I could just be paranoid. Then again, maybe the Mayans were correct…
“Then again, maybe the Mayans were correct…”
If they were, then we have nothing to worry about. The disaster economy will no longer be an issue.
What, what “big thing” did you have in mind? Another world war?
But I agree, there is definitely some coordinated campaign to blow up housing again. The press reports of bidding wars, the slow drip of inventory, the sudden rise of FHA, and the convenient timing with the NAR’s march on Washington (ahasen pointed out the timing) are all indicators that the PTB are putting a floor under prices.
I wonder if the PTB are following the advice of Alessio Rastani,* and protecting their assets in anticpiation of a complete global crash.
———————-
*He of the famous “I’ve been dreaming of a recession” interview: http://www.youtube.com/watch?v=kpg76VjTa58
I honestly believe we are only one or two bailouts away from prosperity.
Mr. Poe,
Please post your beautiful sonnet you penned some months back. It was something about “liars”.
‘Bulls Bet on Bailouts as Europe Looks Into the Abyss’ - Daily Ticker
‘In the perverse logic of the market, bad news is good news because it ups the odds of the thing bulls love best — bailouts.’
What a joke the global economy has become.
Ben busts the balls of bankers and bailout bitches.
I was about to propose a topic on the likely aftermath of a Greek election buffeted by central bank bailouts. How will it play out? A reasonable guess: (1) Dollar gets hammered down when it wants to go up. (2) U.S. stock prices go up, or at least hug the flat line, when they want to go down.
WRAPUP 2-Central banks prepare for turmoil after Greek vote
Fri Jun 15, 2012 9:37am EDT
* Central banks ready to combat Greek market storm
* ECB hints at rate cut
* Britain to flood system with cash
* Greek leftist says bailout deal will be dead by Monday
By Eva Kuehnen and Sven Egenter
FRANKFURT/LONDON, June 15 (Reuters) - Central banks from Tokyo to London checked their ammunition on Friday in preparation for any turmoil from Greece’s election, with the European Central Bank hinting at an interest rate cut and Britain set to open its coffers.
Tensions were high about how to manage the euro zone’s debt crisis - epitomised by Greece’s bankruptcy and need for international aid - and a rare fight broke out between Germany and France, normally the glue that keeps the bloc together.
German Chancellor Angela Merkel criticised France’s economic performance, effectively taking a swipe at Socialist President Francois Hollande who has called for more emphasis on economic growth and less on budget austerity.
The feeling of crisis was real. “We must do everything possible to prevent the euro zone from falling apart,” Dutch Prime Minister Mark Rutte said on television.
ECB President Mario Draghi, one of many policymakers gearing up for trouble after Sunday’s vote in Greece, said his bank was ready to step in and fund any viable euro zone bank that gets in trouble.
He painted a picture of a deteriorating euro zone economy with no inflation danger - conditions for monetary easing.
“There are serious downside risks here,” Draghi told the annual ECB Watchers conference in Frankfurt, two days before the vote that could set Athens on a path out of the euro zone and stoke turmoil in financial markets.
“This risk has to do mostly with the heightened uncertainty.”
…
Related News
Dollar extends losses vs yen after U.S. data
8:50am EDT
Greek turmoil offset by talk of G20 policy response
8:17am EDT
ECB’s Draghi flags euro risks, spurs rate cut talk
7:14am EDT
UK fights euro zone threat with $155 billion credit boost
6:24am EDT
GLOBAL MARKETS-Shares rise as markets bet on central bank support
2:09am EDT
Analysis & Opinion
Battening down the hatches
In the shadow of Greek elections
New ads for financial channels:
‘We make money the old fashioned way; we lose everything and get bailed out.’
Or, ‘Ponzi scheme; it’s not just for Donald Trump anymore.’
Or, “He Madoff with the money. So can we.”
Right now, I’m reading Harry Markopolous’s book, No One Would Listen. It’s about his efforts to dime out Madoff. He spent years trying to get the authorities to pay attention. To no avail.
And that’s your HBB Librarian financial book recommendation du jour.
Based on an old Citibank commercial from the early 80’s: “Because Americans want to scam*, not just survive”
*in the original it was “succeed”
‘Grexit’ worries fuel nation’s vicious circle
By Teo Kermeliotis, for CNN
June 15, 2012 — Updated 1752 GMT (0152 HKT)
Editor’s note: In this story CNN spoke with three people who asked for anonymity because they did not want to reveal details of personal wealth and what they are doing with their money. For this story we changed their names to Spiros, Eirini and Danai.
(CNN) — Twenty four hours after collecting his €80,000 ($100,000) pension lump sum on May 15, Spiros, a retired Greek public servant, called his London-based brother-in-law for his bank details.
Within two weeks, Spiros had transferred a large chunk of the money, which he’d saved over a 30-year career in the armed forces, to his relative. Spiros feared his savings would be destroyed if he left them in Greece. He wanted to protect himself from a “Grexit” — the term coined for the country’s exit from the eurozone — and the likelihood of that slashing the value of his money.
“I had never wanted to move my money abroad it but I was forced to do it,” says Thessaloniki-born Spiros, sounding depressed as he described everyday life in his crisis-struck homeland.
“We’re living in constant uncertainty and we don’t know if there is going to be food on the table or if we’re going to be able to pay for our children’s university studies. We don’t want to see our children sacrificed and pay for the mistakes of the politicians.”
The father of three says Greece’s leaders have failed their people. Spiros says finding a safer haven for his savings was the “last option” that came “out of the necessity” to safeguard the future of his family.
“I’ve always paid my taxes,” he says. “This is now a way of protecting our family since the state is not protecting us.”
Greece, the country whose collapsing finances triggered the eurozone debt crisis, is facing its fifth year of recession. It heads to the polls Sunday for the second time in six weeks. The first vote ended with stalemate with no party able to form a coalition.
This next vote is crucial; it could change not only the course of Greece, but all of the 17-country eurozone.
The weekend which could change the world
The race between the pro-bailout New Democracy party and the anti-austerity package Syriza coalition appears to be tight.
But should the country remain in political limbo, it risks a disorderly default on its next bill payment.
…
Are low new homes sales because of:
1) Weak demand; or
2) Little new development (low supply)
I’m not a supply-sider, so I would argue that the low new sales are because of weak demand (supply shrank because of weak demand).
Stronger demand SHOULD result in more new homes being built…unless prices are too low for builders to justify construction. This leads to question number 2:
Are you in a market where there are multiple bids for homes, and strong demand for new homes? If so, are you seeing new lots being graded (I recall one person noting earthwork being done outside of DC)? If there is no earthwork being done…why not?
Are prices too low to justify new development?
Or is the demand too shallow for builders to take the risk?
Or????
Housing bust causing a future shortage of homes?
Deflation causes prices to fall and companies to go out of business,
first its cheap during the deflation then its gone because production is bust.
will this housing deflation have the same effect?
The problem with believing in this “recovery” is that nothing that caused the crisis has been repaired.
Exactly. The recovery is based on $1.3T a year us government deficits. Take away that, and we’re in depression. How long can these deficits last before we Greece?
Legislators in California “miraculously” passed a budget today.
Tomorrow, their inflated salaries would have ceased had they not. By law.
Other states need to implement such rare and effective legislation.
We can kick ‘em in the ass if we have to. I happily voted in favor of this proposition. Most Californians were equally pissed.
We won. Move on. Do your damn job!!
Haven’t see much at all in the media about this:
http://articles.latimes.com/2012/jan/29/business/la-fi-lew-20120129
Loan forgiveness expiring. This seems like a big deal to me…
I see no reason this cannot be extended at the 11th hour…except that this is an election year, the Congress is deeply divided, and the Republican faction may be in little mood to offer the myriad FBs a reason to think any of Obama’s many mortgage rescue programs actually worked.
The forgiveness was put in place to stop people that were foreclosed from just going bankrupt and wiping out additional debt as well as the unpayable taxes.
It is in the best interest of the banks not to have the debtors go bankrupt because of the tax, so the tax forgiveness from foreclosure will likely be extended.
What’s on the international banking system bailout agenda for this weekend? Last weekend saw the bailout of Bankia and the Spanish banking system. This weekend, the world faces the prospect of titanic countervailing effects between the Grexit and a high-level coordinated central bank effort to sterilize its potential effect on the global financial system.
Are there any further global financial time bombs on the near-term horizon?
Does the fact that some of the PTB are now rationalizing about the potential beneficial effects of a Grexit pretty much guarantee its occurrence?
Germany and the future of the euro
Is Grexit good for the euro?
Jun 16th 2012, 0:25 by Charlemagne | BERLIN
THE departure of Greece from the euro has gone from impossible, to plausible and now almost inevitable - almost regardless of what happens in this weekend’s Greek election. Indeed, some well-placed figures are starting to whisper that Greece leaving the euro may be a good thing after all.
Long before the notion of “Grexit” became commonplace, some economists such as Nouriel Roubini argued that Greece’s only chance of salvation would be to return to the drachma and devalue the national currency in order to regain competitiveness. Structural reforms and internal devaluation of the kind currently being attempted would take too long, and cause a social backlash. Departure from the euro would be less horrendous than staying in, Mr Roubini said on the margins of an Ambrosetti workshop in Cernobbio, on the shore of Italy’s Lake Como, last March. But it would be painful enough to discourage others from attempting it.
Intriguingly, some prominent voices in Brussels and elsewhere are starting to weigh other benefits of Grexit. This is not because they think it can be done painlessly. Even if first-order contagion through the banks can be contained with the various euro-zone rescue funds (and the European Central Bank), many think that breaking the integrity of the euro will immediately raise questions about the future of other countries in the single currency: Ireland, Portugal, Spain or Italy.
Yet it is precisely this fear of meltdown that the pro-Grexit voices regard as beneficial. Why so? Because the danger of implosion will force Germany finally to agree stand unambiguously behind the euro.
This could be done through “banking union” in which responsibility for supervising, winding down and recapitalising big banks is done by some supranational European system. Another option is “fiscal union”, in which at least some of the sovereign debt is mutualised through jointly issued Eurobonds. Doing both would even more convincingly break the deathly embrace of zombie banks and zombie sovereigns.
A second argument is this: if Grexit provides the powerful impulse for integration, it would also remove the greatest impediment to it. It is hard to imagine any country, let alone Germany, being willing to assume liability for Greek banks that may be about to implode, and for the national debt of a state that has failed to abide by Germany’s prescription for reforms (Reuters had an insider’s view on Germany’s exasperation with Greece here).
…
Isn’t this headline a paraphrase of Hamlet’s utterance as he contemplated suicide?
To Grexit Or Not To Grexit?
June 15, 2012
No matter what the outcome of Greece’s Sunday elections is, the next few years will likely mean some pain and austerity for the country. So what should Greeks be hoping for? In this short video, Russ K explains why he believes a Greek exit from the euro would be the less favorable scenario for the average Greek individual.
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Is it pretty much just dark-skinned Wall Street managers born in other countries who are at risk of going to prison over financial crimes? It seems like home-grown Caucasian financial crooks have blanket immunity.
It’s not clear why, but that is what the evidence suggests thus far.
Ex-Goldman Sachs director convicted of fraud, conspiracy
June 16, 2012
Former Goldman Sachs director Rajat Gupta leaves federal court in New York on Friday. / Richard Drew/Associated Press
By Tom Hays
Associated Press
NEW YORK — Former Goldman Sachs board member Rajat Gupta lived the American Dream before being led astray by a wealthy friend who was a master at insider trading.
That was the view of two jurors who on Friday voted with 10 others to convict Gupta of three counts of securities fraud and one count of conspiracy for sharing corporate secrets with hedge fund manager Raj Rajaratnam.
With the verdict, Gupta became the most prominent defendant convicted so far in a wide-ranging Wall Street inquiry conducted by investigators armed with wiretaps.
…
I have a suggestion.
I’m wondering now if what I see across America is producing a permanent wealth divide. Areas with jobs and housing that can be afforded from cash or credit, and areas without jobs where affordability is the least of your worries. Disparities are being allowed to expand across the nation, and that’s a sea change for us. A wholly different USA.