The Housing Bubble

Another day

another U turn

Lisbon is to replace a contentious plan involving deep wage cuts with higher taxes in a policy volte-face following mass protests against a steep ratcheting up of austerity.

The embarrassing U-turn is one of the most significant shifts by a eurozone government in response to demonstrations against austerity measures required under an international bailout programme.

http://www.ft.com/cms/s/0/971588f4-0664-11e2-bd29-00144feabdc0.html#axzz27YxKydQI

another riot

Protesters clashed with police in Spain’s capital on Tuesday as the government prepares a new round of unpopular austerity measures for the 2013 budget that will be announced on Thursday.

At least 22 demonstrators were detained and 28 injured, as clashes continued late into the evening near the Spanish parliament, Spanish broadcaster TVE reported.

More than 1,500 police in riot gear had been deployed throughout the day in preparation for the demonstration, with barricades being set up.

http://www.telegraph.co.uk/news/worldnews/europe/spain/9567090/Spain-rubber-bullets-fired-at-violent-anti-austerity-protest.html

another general strike

Trade unions in Greece have begun the first general strike since the country’s conservative-led coalition government came to power in June.

Wednesday’s 24-hour walkout is to protest at new planned spending cuts of more than 11.5bn euros ($15bn; £9bn).

The savings are a pre-condition to Greece receiving its next tranche of bailout funds, without which the country could face bankruptcy in weeks.

Large anti-austerity demonstrations are also planned.

http://www.bbc.co.uk/news/world-europe-19724284

The Government’s campaign for debt relief was dealt a fresh blow yesterday as Germany, Finland and the Netherlands said national bodies should remain liable for most bank losses. The three states are insisting that governments remain on the hook for loss-making legacy assets even after any bank rescues by the ESM fund.

This demand, laid down by the countries’ finance ministers, is in apparent defiance of the decision by EU leaders in June to break the link between sovereign and bank debt.

After talks near Helsinki, the ministers said the ESM should assume only a limited burden if it makes direct bank recapitalisations.

http://www.irishtimes.com/newspaper/breaking/2012/0926/breaking16.html

This won’t go down well in Spain or any of the other PIIGS.

Ralph Nader: President Obama’s a ‘war criminal’

http://www.politico.com/news/stories/0912/81649.html

1 empty and at least 3 victims that haven`t paid in 3-5 years out of the 18 houses on my street. Not a one of them shows up on any foreclosure site and yet the shadow inventory is shrinking?

“Still, South Florida’s July home sale prices are 47 percent below what they were at the peak of the market in December 2006.”

“47 percent below what they were” Now that is a line in the sand.

South Florida home prices highest since 2009 tax credit boom

by Kim Miller

Home prices in Palm Beach, Broward and Miami-Dade counties were up more than 5 percent in July from the previous year, pushing pricing to levels not seen since the 2009 tax-credit driven increase.

According to the Standard & Poor’s/Case-Shiller index released this morning, all 20 metropolitan areas measured, including South Florida, saw higher prices in July over June with an average increase of 1.6 percent.

Analysts specifically mention South Florida in their report. July marked the eighth straight month of price increases in the three counties.

“Among the cities, Miami and Phoenix are both well off their bottoms with positive monthly gains since the end of 2011,” said David Blitzer, chairman of the index committee. “All in all, we are more optimistic about housing. Upbeat trends continue.”

Pricing hikes seen in the fall of 2009 before the first-time homebuyer tax credit was extended pushed Florida’s prices to post-crash highs, which then toppled after the tax credit’s expiration in 2010. In July, the index level in South Florida was about the same as in October 2009.

Still, South Florida’s July home sale prices are 47 percent below what they were at the peak of the market in December 2006.

September 25, 2012

Health Premiums Up $3,000; Obama Vowed $2,500 Cut

By JOHN MERLINE, INVESTOR’S BUSINESS DAILY

During his first run for president, Barack Obama made one very specific promise to voters: He would cut health insurance premiums for families by $2,500, and do so in his first term.

But it turns out that family premiums have increased by more than $3,000 since Obama’s vow, according to the latest annual Kaiser Family Foundation employee health benefits survey.

Premiums for employer-provided family coverage rose $3,065 — 24% — from 2008 to 2012, the Kaiser survey found. Even if you start counting in 2009, premiums have climbed $2,370.

What’s more, premiums climbed faster in Obama’s four years than they did in the previous four under President Bush, the survey data show.

There’s no question about what Obama was promising the country, since he repeated it constantly during his 2008 campaign.

2012 US Presidential Election Vote Share Market

Posted: 8:02 a.m. Wednesday, Sept. 26, 2012

Greek protest turns violent during general strike

By ELENA BECATOROS

The Associated Press

ATHENS, Greece —
Police clashed with protesters hurling petrol bombs and bottles in central Athens Wednesday after an anti-government rally called as part of a general strike in Greece turned violent.

Riot police used tear gas and pepper spray against several hundred demonstrators after the violence broke out near the country’s parliament. Protesters also set fire to trees in the National Gardens and used hammers to smash paving stones and marble panels to use as missiles against the riot police.

About 50,000 people joined the union-organized march in central Athens on Wednesday, held during a general strike against new austerity measures planned in the crisis-hit country. The action, the first large-scale walk-out since the country’s coalition government was formed in June, closed schools and disrupted flights and most services.

Everyone from shopkeepers and pharmacists to teachers, customs workers and car mechanics joined the demonstration, seen as a test of public tolerance for more hardship after two years of harsh spending cuts and tax hikes.

“People, fight, they’re drinking your blood,” protesters chanted as they banged drums.

One of those striking was Athens hospital worker Alkis Betses, who has seen his monthly salary fall from €1,300 to €800 (($1,680 to $1,035), says new cuts will bring it down to €600 ($775).

“How can you survive on 600 a month, with ever-rising taxes, and continue to pay bills and buy necessary supplies?”

Betses said hospitals have been hard hit by spending cuts, with staff shortages and long delays in doctors’ overtime pay for night shifts.

“The resentment has been there for long before the new measures. Imagine what will happen when they’re made public,” he said.

June 14, 2012 8:12 PM

Austerity brings Greece’s healthcare system to its knees

Dr. Chris Rokkas is a top cardiologist at Attikon hospital, but these days the U.S.-trained surgeon rarely sets foot in an operating room, which is bad news for Georgia Scambi, who needs surgery urgently.

“She is in serious risk for developing a fatal heart attack at this point,” Dr. Rokkas said.

If he were in a hospital in America, Dr. Rokkas would have operated within 24 hours. One week later, however, he’s still waiting for the right equipment.

Greece’s bureaucratic healthcare system has always been inefficient, but austerity measures introduced in the wake of the financial crisis have cut public health spending by 25 percent — $12 billion — bringing the system to its knees.

http://www.cbsnews.com/8301-18563_162-57453670/austerity-brings-greeces-healthcare-system-to-its-knees/ - 64k -

Does this story never end, or does it merely seem endless?

Euro Watch
Bond Investors Register Nervousness About Spain
By DAVID JOLLY
Published: September 25, 2012

PARIS — Spain’s borrowing costs rose on Tuesday at an auction of short-term debt, showing investors’ uncertainty about the country’s strategy for emerging from crisis.

The Spanish Treasury sold almost 4 billion euros ($5.2 billion) in bills, the maximum amount estimated. The three-month bills drew a yield, or interest rate, of 1.203 percent. That was up sharply from the 0.946 percent Spain paid at a similar auction in late August.

The yield on six-month debt rose to 2.213 percent from 2.026 percent at the previous auction.

It was a sign of investor edginess over whether and when Spain would eventually ask for help from the European Central Bank’s recently announced bond-buying program.

While that program was intended to help keep a lid on the borrowing costs of countries like Spain, and perhaps Italy, the Spanish government has been hesitant to risk the stigma of requesting such assistance. But the auction on Tuesday could be a sign that the investors see another risk — that Spain will be unable to climb out of its problems without a bailout — and are again beginning to demand a higher return to hold the country’s debt.

In Rome, the Italian Treasury on Tuesday sold just less than 4 billion euros of two-year, zero-coupon notes, with the yield dropping to 2.53 percent. That was the lowest rate since a similar auction in March, and below the 3.06 percent Italy had to pay to sell similar securities in August.

But both Italian and Spanish long-term debt yields edged higher on Tuesday. At the end of the European trading day, the yield on the 10-year Italian government bond was at 5.077 percent, up 4.9 basis points. The yield on the Spanish 10-year was 5.687 percent, up 6.8 basis points. A basis point is one-hundredth of a percentage point.

Before Tuesday, the two embattled governments’ borrowing costs had generally been falling since the announcement of the central bank’s bond-buying program on Sept. 6. The bank’s president, Mario Draghi, said he was prepared to buy government bonds in unlimited quantities, if necessary, to stabilize the euro zone.

The Spanish auction came as Madrid was bracing for a big demonstration outside Parliament on Tuesday evening. Thousands protested Prime Minister Mariano Rajoy’s handling of the country’s financial crisis and its deeply distressed labor market.
…

Clashes erupt at Greece anti-austerity protest
By Renee Maltezou and Harry Papachristou
ATHENS | Wed Sep 26, 2012 8:28am EDT

(Reuters) - Greek police fired teargas at hooded youths hurling petrol bombs and stones as tens of thousands took to the streets in Greece’s biggest anti-austerity demonstration in months on Wednesday.

The clashes occurred after more than 50,000 people marched to parliament chanting “We won’t submit to the troika (of lenders)” and “EU, IMF Out!” on a day of strikes against a new round of cuts demanded by EU and IMF lenders.

As the rally ended, dozens of black-clad youth threw stones, petrol bombs and bottles at riot police, who responded with several rounds of teargas. Police chased the protesters through Syntagma square in front of parliament as helicopters clattered overhead. Smoke rose from a small blaze in a corner.

The strikes, called by the country’s two biggest unions representing half the four-million-strong work force, is shaping up to be the first test of whether Prime Minister Antonis Samaras can stand his ground.

Police officials estimated the demonstration was the largest since a May 2011 protest, and among the biggest since Greece first resorted to aid from international lenders in 2010.

“We can’t take it anymore - we are bleeding. We can’t raise our children like this,” said Dina Kokou, a 54-year-old teacher and mother of four who lives on 1,000 euros a month.

“These tax hikes and wage cuts are killing us.”

The traditional summer break has allowed the fragile conservative-led coalition to enjoy relative calm on the streets since narrowly coming to power on a pro-euro, pro-bailout platform, but unions predict an end to the lull.
…

Watching these developments, I have to wonder if my friend’s company, which does lots of investing in China for its clients, is destined to see lots of their clients get wiped out.

China Stocks Breach Key Level, More Losses Seen
Published: Wednesday, 26 Sep 2012 | 5:12 AM ET
By: Ansuya Harjani
Assistant Producer, CNBC Asia

China’s benchmark Shanghai Composite Index broke below a key support level on Wednesday, touching its lowest point in more than three and a half years, and market watchers told CNBC mainland stocks are set to suffer further losses in the coming weeks.

The index, which fell 1.2 percent to close at 2,004.2, briefly traded below the 2,000 support level, but managed to close above it just before the end of the day.

“The Shanghai Composite has been a global equity underperformer for many months and years, and the move below 2,000 is yet another nail in the bearish coffin … this is a psychological level and is meaningful,” Dhiren Sarin, chief technical strategist, Asia-Pacific at Barclays, told CNBC.

Chinese stocks have been in a steady downtrend since May this year, as retail investors — which account for around 80 percent of the turnover at the country’s two stock exchanges in Shanghai and Shenzhen — dump equities in search of less volatile alternatives. Since the start of the year, the Shanghai Composite has fallen 9 percent.

Having briefly dropped below 2,000, the index is expected to decline to 1,960 in the coming week or two — a 2 percent downside from current levels — according to Sarin.

Philip Chan, director at Shenyin Wanguo Securities, agreed that there is risk of further selloff in the market, as confidence among local investors remains low.

“Local fund managers haven’t turned positive on the market because they aren’t convinced about the recovery in the economy yet. They are looking for more data that point to a more fundamental recovery,” Chan said.

Recent numbers out of China have shown that the slowdown in the world’s second largest economy is deeper than initially thought. Factory activity in August, for example, contracted for the 10th month in a row.

The government has announced both monetary and fiscal stimulus for the flagging economy this year, but unlike the foreign investment community, domestic investors have failed to get excited by these announcements, Chan said.

“While western watchers are looking for more stimulus, the people closer to the market are looking at the quality of the stimulus,” he said.
…

Real estate: today’s bidding wars are for farmland
Low interest rates and record high crop prices means high yields for land
by Tamsin McMahon on Tuesday, September 25, 2012 11:44am
Photo by Peter Power/The Globe and Mail

The hottest real estate investments aren’t in big cities. Today’s bidding wars are in the breadbasket.

Much like the frenzy that has swept Canada’s urban housing market, real estate prices are soaring in the hinterlands. Prices of farmland have shot up as much as 25 per cent across Canada this year. Fruit growers in B.C.’s Fraser Valley command $60,000 an acre. Bidding wars are breaking out for farms in Saskatchewan, while grain land in Alberta “can sell virtually overnight,” says a report this September from Re/Max. In some areas of southwestern Ontario, prices jumped 70 per cent in the past two years to $15,000 an acre.

Much of the enthusiasm for farmland has been driven by farmers enticed to expand their operations by low interest rates and record-high prices for corn, barley and wheat, thanks to the worst drought in a half-century that’s swept the U.S.

But it’s not only farmers that see a gold mine in cropland. Central Alberta’s oil sector has helped fuel a 25 per cent jump in farm prices. Nearly three-quarters of farms have oil and gas wells that are leased to oil companies for added income. Where once sellers could add three times the rental income of a well to the price of their property, they can now command five or six times, says Don MacDonald, a Re/Max realtor in central Alberta.

Institutional investors, too, have begun looking to agricultural real estate, says Tom Eisenhauer, head of Bonnefield Financial, which invests in Canadian farmland. Private investors own just “a few hundred million” of Canada’s $280-billion worth of farmland. Bonnefield owns 15,000 acres, mostly in Ontario and Manitoba, which it leases back to farmers. Farm prices, Eisenhauer says, have proven to be a much more accurate hedge against inflation than gold, a popular safe haven for investors. “If you’re a high net worth individual or pension fund, boring and safe and non-volatile looks pretty good,” he says. “It’s only been recently that boring has been removed” from agricultural real estate.

Farmers have been fuelling the price wars by holding onto their farms and driving down the supply of available land for the same reasons that investors are so keen to buy it, MacDonald says. “There’s the concern that landowners have right now: ‘If I sell my land, what am I going to put my money into?’ ” he says. “They don’t like the stock market volatility either.”

It’s not the first time Canada has witnessed a run on farmland. Prices soared in the 1970s before collapsing when interest rates shot up. Eisenhauer says this time it’s different.
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One Fed official’s comments can have a very long reach in tightly-interconnected (i.e. non-decoupled) international stock markets.

German Stocks Drop as Plosser Says Bond Buying May Fail
By Jonathan Morgan - Sep 26, 2012 3:11 AM PT

German stocks fell the most in three weeks after Federal Reserve Bank of Philadelphia President Charles Plosser said the latest round of quantitative easing probably won’t boost growth or employment in the U.S.

Deutsche Bank AG (DBK) and Commerzbank AG (CBK), Germany’s biggest lenders, sank at least 4 percent. Volkswagen AG (VOW) dropped 2.7 percent and Daimler AG slid 2.4 percent. Banks and automobiles contributed the most to the Stoxx Europe 600 Index’s decline.

The DAX Index (DAX) lost 1.6 percent to 7,308.47 at 12:03 p.m. in Frankfurt, its biggest drop since Aug. 30. The benchmark has still rallied 22 percent from this year’s low on June 5 as European Central Bank policy makers approved an unlimited bond- buying program and the Fed started a third round of asset purchases. The broader HDAX Index also fell 1.6 percent today.

“There has been underlying nervousness for the past few days,” Chris Beauchamp, a market analyst at IG in London, said in a telephone interview. “Plosser’s comments that bond buying might fail and discontent in Spain are leading to risk-aversion taking hold again.”

Plosser said late yesterday that new bond buying announced by the Fed this month probably won’t boost growth or hiring and may jeopardize the central bank’s credibility.

The Federal Open Market Committee said on Sept. 13 that it will undertake a third round of quantitative easing by purchasing mortgage-backed securities at a pace of $40 billion per month until labor markets “improve substantially.” Policy makers are using unconventional tools to attack a jobless rate stuck above 8 percent since February 2009.

Stimulus Effectiveness

“While it can be observed that the effectiveness of quantitative easing is wearing off, the announcement of a third round of quantitative easing should already be incorporated in the most recent price movement,” Petra Grafin von Kerssenbrock, a technical analyst at Commerzbank in Frankfurt wrote in a message.

Deutsche Bank and Commerzbank retreated 5.1 percent to 31.13 euros, and 4.2 percent to 1.44 euros, respectively.

Volkswagen, Europe’s biggest carmaker, sank 2.7 percent to 148.10 euros. Daimler AG (DAI), the third-biggest maker of luxury vehicles, fell 2.4 percent to 38.50 euros. Bayerische Motoren Werke AG (BMW), the largest manufacturer of luxury cars, lost 2.1 percent to 57.56 euros.
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Three powerful EU member-states had told Ireland to “drop dead”, Fianna Fáil leader Micheál Martin said in the Dáil this morning.

However, Taoiseach Enda Kenny insisted the EU was committed to enabling Ireland to break the link between bank debt and sovereign debt.

Sinn Féin’s Mary Lou McDonald said that, if the message wasn’t “drop dead” it was certainly “get lost”.

Leaders’ Questions in the Dáil was completely taken up with reaction to the demand by finance ministers from Germany, Finland and the Netherlands that the European Stability Mechanism should not take responsibility for bank losses that occurred before it was established.

http://www.irishtimes.com/newspaper/breaking/2012/0926/breaking16.html

Some very unhappy bunnies indeed.

Every day in recent memory when the Euro took a hit, it has translated into a stronger dollar and a bad day on Wall Street.

But maybe this time is different?

Stocks, Euro Decline on Economy as Spanish Yield Tops 6%
By Stephen Kirkland and Jason Clenfield - Sep 26, 2012 5:40 AM PT

European stocks fell the most in two months and the euro weakened as Spain’s 10-year yields rose above 6 percent, spurring concern the debt crisis is worsening. Oil retreated for a third day, while Treasuries extended the longest rally since 2008.

The Stoxx Europe 600 Index (SXXP) lost 1.6 percent at 8:40 a.m. in New York. Futures on the Standard & Poor’s 500 Index slipped 0.3 percent after the gauge sank the most in three months yesterday. The euro fell 0.4 percent to $1.2848 and Spain’s 10-year yields jumped as much as 30 basis points to 6.04 percent. U.S. Treasuries rose for an eighth day, the longest run of gains since December 2008. Oil retreated 1.3 percent and copper slid 1.6 percent.

Germany, the Netherlands and Finland said late yesterday Spain should bear the cost of problems in their banks, with the European Stability Mechanism assuming only a limited burden in recapitalizations. The Bank of Spain said the economy kept falling at a “significant pace” in the third quarter and reports showed French consumer confidence dropped for a third month in September and Italian retail sales declined in July. Federal Reserve Bank of Philadelphia President Charles Plosser said yesterday more bond purchases probably won’t boost growth.

“There’s an ongoing drip feed of negative news,” said Richard McGuire, a fixed-income strategist at Rabobank International in London. The ESM announcement “appears to cast some doubt as to whether Spain will be able to disburden itself of the liabilities it will assume via its banking bailout.”
…

Come out come out….

Can aapl carry the economy?

I will reiterate a question I raised yesterday, as perhaps it was buried too deep in the Bits Bucket: Does the Fed really ever need to exit from all the asset purchases it has recently made, or can it simply keep them forever entombed on its balance sheet, similar to the fate of poor Fortunato in The Cask of Amontillado?

P.S. I was happy to discover language in Plosser’s speech questioning the wisdom in using monetary policy to preferentially support the mortgage market. So far it seems as though MSM writers have missed this point.

Speeches
Economic Outlook and Monetary Policy
Presented by Charles I. Plosser, President and Chief Executive Officer, Federal Reserve Bank of Philadelphia
CFA Society of Philadelphia/The Bond Club of Philadelphia, September 25, 2012

Introduction

Let me welcome you all to the Federal Reserve Bank of Philadelphia and to thank both the CFA Society and the Bond Club for inviting me to speak today. In October of 2006, I gave my first speech as president of the Federal Reserve Bank of Philadelphia to the CFA Society of Philadelphia. Well, a lot has happened since then, and the world is a different place. So I will use my time with you today to offer my perspective on the current state of the economy and monetary policy.
…
Before continuing, I should note that my views are my own and not necessarily those of the Federal Reserve Board or my colleagues on the FOMC.
…
Monetary Policy

Let me now turn to some thoughts on monetary policy. Even before the actions taken this month, the Fed had put into place an extraordinary amount of accommodation to support the recovery. The Fed has kept the federal funds rate near zero for more than 45 months; it has completed two rounds of asset purchases that more than tripled the size of the Fed’s balance sheet; and it is implementing a maturity extension program, known as “operation twist,” which is lengthening the maturity of our holdings of Treasury securities. These actions have changed the composition of the portfolio from mainly short-term Treasuries before the crisis to mostly longer-term Treasuries and housing-related securities today.

Many of these actions were taken at the height of the financial crisis and during the ensuing deep recession. But the financial crisis has substantially abated and the economy has been healing, if somewhat more slowly than we would like. In fact, if you compare today’s economic and financial conditions to the conditions that prevailed when the FOMC previously took bold actions, you will see that the economy is undoubtedly in a better position.

At its latest meeting in September, the FOMC decided to begin a third round of quantitative easing, commonly known as QE3, with the purchase of additional agency mortgage-backed securities at a pace of $40 billion per month. The FOMC statement indicated that if the outlook for the labor market does not improve substantially, the Fed would make these purchases and more and would employ other policy tools as appropriate until such improvement is achieved within a context of price stability. I interpret “within a context of price stability” to mean so long as the inflation outlook remains near the Committee’s goal of 2 percent. The FOMC statement also said that the Committee expects a highly accommodative stance of monetary policy to remain appropriate for a considerable period after the economic recovery strengthens. It also stated that the Committee currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015.

The Committee’s decision was based on the view that with unemployment far above the level typically seen in normal times and inflation near its goal, increasing the amount of monetary accommodation should help bring unemployment down without jeopardizing our inflation goal. And since the Fed said it expects to keep substantial accommodation in place even after the recovery strengthens, people and businesses should be reassured that the recovery will remain intact, even in the face of future adverse shocks. This should make households and firms comfortable spending more today rather than saving, which should, in turn, spur hiring.

I opposed the Committee’s actions in September because I believe that increasing monetary policy accommodation is neither appropriate nor likely to be effective in the current environment. Every monetary policy action has costs and benefits, and my assessment is that the potential costs and risks associated with these actions outweigh the potential meager benefits.

Given the magnitude and nature of the shocks that hit our economy, one should not be particularly surprised by the slow recovery. Both the housing and the financial sectors suffered large declines, and it will take time for the economy to adjust. While unemployment is expected to remain above FOMC participants’ range of estimates of its longer-run level for some time, it is not at all clear that monetary policy can speed up that transition. In other words, the slow pace of the recovery should not be taken as evidence that the stance of monetary policy is inappropriate or that ever more aggressive accommodation can speed up that pace.

Indeed, many economists expect that further asset purchases by the Fed are unlikely to reduce long-term interest rates by a significant amount; some studies suggest that the effect will be quite small and transitory. Given our current economic situation and my reading of the empirical evidence, I do not believe that lowering interest rates by a few more basis points will spur further growth or higher employment. Business leaders who have talked to me continue to cite uncertainty about fiscal decisions — here and abroad — as the greatest hindrance to hiring and investment. Hopefully these uncertainties will abate over time, but the central bank can do little to alleviate them.

And as far as households are concerned, they continue to try to repair their balance sheets in the wake of substantial losses of housing wealth, as I indicated earlier. They are deleveraging and saving more. It seems unlikely that a small drop in interest rates will overturn the strong desire to save and, instead, induce households to spend more. In fact, driving down interest rates even further may encourage consumers to save even more to make up for lower returns.

Thus, in my view, we are unlikely to see much benefit to growth or to employment from further asset purchases. If I am right, then conveying the idea that such action will have a substantive impact on labor markets and the speed of the recovery risks the Fed’s credibility. This is quite costly: If the public loses confidence in the central bank, our ability to set effective monetary policy in the future will be harmed and households and businesses will feel the consequences.

The recent actions risk the Fed’s credibility in other ways as well. The rationale for the actions leading to increased spending today depends on the Fed’s ability to convince the public that it will conduct policy in a fundamentally different way than it has in the past. People must believe that we will delay raising interest rates compared to when we normally would and, by so doing, make the economy stronger than it otherwise would be. At the same time, people must believe that we will ensure that inflation expectations do not take off and threaten longer-run price stability. Making such a change in the policy regime believable will be very hard to do. If the public doesn’t believe that we will delay raising rates, they won’t bring spending forward and the policy will be ineffective. But if they do believe we will delay raising rates, they may infer that the Fed is willing to tolerate considerably higher inflation. This may spur an increase in inflation expectations, which would require a response from the FOMC, or else risk the credibility of its commitment to keep inflation low and stable. I do not think it prudent to risk that hard-won credibility. The subtlety and complexity of successfully managing expectations in this manner make this quite a risky policy strategy in my view, with little evidence of quantitatively meaningful results for employment.

Continued expansion of the Fed’s balance sheet has other costs as well. By greatly expanding the size of the Fed’s balance sheet, the new asset-purchase program will exacerbate the challenges that the Fed will face when it comes time to exit this period of extraordinary accommodation, risking higher inflation and harm to the Fed’s reputation and credibility. I have been a student of monetary theory and policy for over 30 years. One constant is that central banks tend to find it easier to lower interest rates than to raise them. Moreover, identifying turning points is difficult even in the best of times, so timing the change in the direction of policy is always a challenge. But this time, exit will be even more complicated and risky. With such a large balance sheet, our transition from very accommodative policies to less accommodative policies will involve using tools we have not used before, such as the interest rate on reserves, term deposits, and asset sales. Once the recovery takes off, long rates will begin to rise and banks will begin lending the large volume of excess reserves sitting in their accounts at the Fed. This loan growth can be quite rapid, as was true after the banking crisis in the 1930s, and there is some risk that the Fed will need to withdraw accommodation very aggressively in order to contain inflation. At this point, it is impossible to know whether such asset sales will be disruptive to the market. A rapid tightening of monetary policy may also entail political risks for the Fed. We would likely be selling the longer maturity assets in our portfolio at a loss, meaning that we may be unable to make any remittances to the U.S. Treasury for some years. Yet, if we don’t tighten quickly enough, we could find ourselves far behind the curve in restraining inflation.

While these risks are very hard to quantify, it is clear that the larger the Fed’s portfolio becomes, the higher the risk and the potential costs when it comes time to exit. And based on my economic outlook, that time may come well before mid-2015. In my view, to keep the funds rate at zero that long would risk destabilizing inflation expectations and lead to an unwanted increase in inflation. In fact, some are interpreting the FOMC’s statement that we will keep accommodation in place for a considerable time after the recovery strengthens as an indication that the Fed is focused on trying to lower the unemployment rate and is willing to tolerate higher inflation to do so. This is another risk to the hard-won credibility the institution has built up over many years, which, if lost, will undermine economic stability.

Some of my colleagues on the FOMC have advocated giving quantitative triggers or thresholds for the level of unemployment and inflation to explain the economic conditions that would lead the Fed to consider a change in policy stance. For example, the Fed might indicate that extraordinary accommodation would remain in place if unemployment were above, say, X percent, so long as its outlook for medium-run inflation was not higher than, say, Y percent.

I believe that policy should be state-contingent and systematic, and that the FOMC should strive to explain its policy reaction function — how it expects to change policy as economic conditions change. A Taylor rule is one such reaction function, but research indicates that other simple rules are good guides to policy even when the true model of the economy is uncertain. These rules involve policy responding aggressively to deviations of inflation from its target and also responding to deviations of output from some concept of its potential. In addition, the rules tend to involve some smoothing of the policy rate over time rather than sharp jumps in rates. Using such robust rules as guides to policy is, in my view, the appropriate way to communicate policy guidance. As a result, as many of you know, I have never been an advocate of calendar-date forward guidance. I thought it was a mistake when we implemented that language, and it remains a nettlesome communication problem.

But while the unemployment-inflation thresholds do move away from calendar-date guidance and toward economic conditions, they fall short of a reaction function that I would like to see, since they say nothing about how monetary policy will change after such levels are reached. Will the FOMC tighten quickly? Or slowly? How will the Committee decide? In addition, the unemployment rate is not the only factor to consider in judging the state of labor markets. Indeed, it fell two-tenths of a percentage point in August, yet few think that represented improved labor market conditions. The reduction stemmed from a decrease in the participation rate rather than an increase in employment. In addition, I am not convinced that the inflation trigger would prove to be much of a constraint. While the unemployment trigger is based on the current value, the inflation trigger is based on the outlook for inflation, and if monetary policy is being set appropriately, this outlook should be consistent with price stability. Thus, I believe that using thresholds or triggers could easily put us behind the curve, if we have a tendency to underestimate future inflation.

Finally, I also opposed September’s decision to purchase additional mortgage-backed securities. In general, central banks should refrain from preferential support for one sector or industry over another. Those types of credit-allocation decisions rightfully belong to the fiscal authorities, not the central bank. Engaging in such actions endangers our independence and the effectiveness of monetary policy.
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If this is how the price moves when goldbugs are optimistic, it’s scary to contemplate what will happen when they give up the faith!

Sept. 26, 2012, 9:08 a.m. EDT
Gold futures tumble amid Europe worries
By Sara Sjolin, MarketWatch

LONDON (MarketWatch)—Gold futures wobbled in electronic trade on Wednesday as renewed concerns about the euro zone added pressure, while solid central-bank buying supported prices.

Losses for gold ramped up as Europe stocks tumbled and the dollar climbed. Gold for December delivery (GCZ2 -0.93%) slid $19.20, or more than 1%, to $1,747.40 an ounce during premarket U.S. trading.

Most stock indexes and the euro fell lower, as concerns that Greece may run out of money ignited fears of a “Grexit”, while a snap election in Spain’s Catalonia region sent the country’s bond yields shooting higher. See: Spain yields surge on Catalonia, Greek uncertainty.

The ICE dollar index (DXY +0.29%), which measures the greenback against a basket of six other currencies, rose to 79.90 from 79.673 late the previous day.

Dollar-denominated commodities tend to fall on a stronger dollar as they get more expensive for holders of other currencies.

Data published Tuesday by the International Monetary Fund, however, lent some support to prices, as they showed that central banks continued to buy gold in August, with Kazakhstan, Turkey, South Korea and Russia boosting their gold reserves.

“Central banks are likely to continue to buy gold for the remainder of this year, thereby stripping supply from the market and contributing to climbing gold prices,” analysts at Commerzbank said in a note.
…

I have two “feet on the ground” bubble related stories:

1) TWO count em TWO local diploma mill campus (campii?) “recently” announced are closing. The downtown one charged inner city youths mid five figures for unaccredited training and had an amazing 9% placement rate. No not 59% or 99% or some typo like that… NINE percent placement in their field. The other 91% merely walked away with five digit student loans that can’t be discharged in bankruptcy. Figures from a local birdcage liner aka newspaper article. The 10 million in city backed bonds to build the place 2 years ago could not even keep it afloat. I didn’t think the higher ed bubble was going to pop unless the govt took away the free cheese, but here it goes! The other diploma mill campus shutting down is in one of the local white ghettos, which brings us to the second story:

2) palmetto asked yesterday where the white ghettos are. I have personal knowledge about this having lived in a new, growing one as a youth. Look for a inner-ring suburb where the houses are tiny little things absolutely packed together into tiny lots, like a 1000 sq foot house on a 1050 sq foot lot. In wisconsin, West Allis was a pretty darn nice place to grow up before 1975 or so… all the neighbors worked at the plants as $75K/yr tool and die makers and whatever other highly skilled highly paid trades. In the 70s all the plants closed and its now majority (but not exclusively) meth dealers and users. My parents abandoned ship around 1980 when intense desire for property tax revenue lead to calls to demand pet licenses for cats… and tropical fish. Nobody younger than me believes me when I claim it was an awesome place to live… well… until 1975 or so… Another way to find a white ghetto is to find a place with white people where every strip mall has at least 3 payday loan places and two tattoo/piercing studios and a mcdonalds/other fast food restaurant. Miles of this repeated pattern along some roads. Yes there is not the business to support them, but they’re great cash businesses to launder drug money. That’s why the parking lots are always empty but they never close. The housing bubble aspect of this is this breeds an attitude where if someone in my age group sees 90% of the lot being house that automatically equals ghetto. This causes severe issues with McMansion developments… If I tell a realtor type that 90% of the lot is house that makes it a ghetto, it gets them all wound up how the lot is ten thousand square feet and the house is nine thousand square feet, and 9000 sq ft is not typical ghetto housing, but but but but … “90% of the lot is house therefore its a ghetto”. That’s just how I grew up. Making the ghetto bigger doesn’t make it not ghetto, it just makes it bigger…

Posted: 8:44 a.m. Wednesday, Sept. 26, 2012

US futures dip as European situation deteriorates

The Associated Press

NEW YORK —
U.S. stock futures slid Wednesday as the European economic crisis devolved into social unrest in the most vulnerable countries, such as Greece and Spain.

Signaling a broader instability in the region, Germany failed to raise sufficient bids for the country’s benchmark 10-year bonds Wednesday as a rush for safe havens in a “very volatile market environment” drove average yields down to 1.52 percent.

Dow Jones industrial futures fell 19 points to 13,386. The broader S&P futures gave up 2.7 points to 1,434.50. Nasdaq futures slid 7.5 points to 2,795.75.

Developments in Europe overshadowed what is expected to be more evidence Wednesday of a U.S. housing market on the rebound.

The Commerce Department releases its new home sales report at 10 a.m. Eastern, and economists believe that sales likely rose again in August.

Sales of previously occupied homes jumped in August to the highest level since May 2010. Builder confidence is at a six-year high and construction of single-family homes rose last month to the fastest annual rate in more than two years. However, even with the gains, home sales and construction remain well below what could be considered healthy levels.

And the fear is that a broader recession in Europe could lead to a stall in whatever economic recovery is occurring in the U.S., where the housing market has been a major drag for five years.

Tens of thousands of protesters have taken to the streets in Athens and Madrid, where they clashed with riot police ahead of a new round of spending cuts and tax hikes.

Police in Athens used tear gas and pepper spray during violent protests that broke out near the country’s parliament. Protesters also set fire to trees in the National Gardens. About 50,000 people marched in central Athens on Wednesday, kicking off a general strike against new austerity measures.

In the aftermath of the chaos that erupted Tuesday, the central bank of Spain said country’s economy continues to shrink “significantly.” The main IBEX index in Madrid tumbled 2.6 percent.

Poland said Wednesday that its jobless rate had risen to 12.4 percent by the end of August, compared with 12.3 percent in July, further signs that the economic distress is spreading.

Sacramento Foothills Rental Inventory: Absorbed and Now Tight

Last week I reported the SFR rental inventory suddenly increased to levels 3 times the count from September 2011. Now, it has dropped back to the same tight levels we have seen for the last 2 years.

I don’t understand the increase in September, but it was all absorbed quickly. Rents have moderated down 3-5% after increasing 10-20% in 2010 & 2011. It is a curious market.

Comment by vinceinwaukesha
2) palmetto asked yesterday where the white ghettos are. I have personal knowledge about this having lived in a new, growing one as a youth.
————————————————-
The reason many people find them difficult to detect is because the ghetto is not a place, its a person.

When such persons collect in one place, the place becomes a ghetto.

Has anyone heard the term “pink ghetto?”

Thats the pejorative term for jobs or work where there are lots of women. Men see this and assume the positions have less value because they suspect something or someone put the women there. Just like jobs that have a lot of black people. The assumption is, no matter how much money they are making, they would make more if they were white and/or male.

Maybe we need a different term to describe a white ghetto because the dynamics are not the same. Growing up around white people, I noticed that no matter how much pathology they engaged in, at any point they decided to “straighten up and fly right”, they were given the opportunity to do so. I lived with white males with criminal records (multiple DWIs, drug convictions…) who could work at places that would not hire me.

I was in the northern Virginia area and watched the construction industry transform from all white male, to mostly latino, without ever passing through phase were they would hire a black male such as myself.

So yeah, this is why I think Obama is a joke a fraud and a total tool. They took a black male with no executive experience and made him president of the United States.

(((shakin my head)))

Spain Recoils, as Its Hungry Forage Trash Bins for a Next Meal

Published: Tuesday, 25 Sep 2012 | 1:26 PM ET

By: Suzanne Daley
The New York Times

On a recent evening, a hip-looking young woman was sorting through a stack of crates outside a fruit and vegetable store here in the working-class neighborhood of Vallecas as it shut down for the night.

At first glance, she looked as if she might be a store employee. But no. The young woman was looking through the day’s trash for her next meal. Already, she had found a dozen aging potatoes she deemed edible and loaded them onto a luggage cart parked nearby.

“When you don’t have enough money,” she said, declining to give her name, “this is what there is.”

The woman, 33, said that she had once worked at the post office but that her unemployment benefits had run out and she was living now on 400 euros a month, about $520. She was squatting with some friends in a building that still had water and electricity, while collecting “a little of everything” from the garbage after stores closed and the streets were dark and quiet.

Such survival tactics are becoming increasingly commonplace here, with an unemployment rate over 50 percent among young people and more and more households having adults without jobs. So pervasive is the problem of scavenging that one Spanish city has resorted to installing locks on supermarket trash bins as a public health precaution.

http://www.cnbc.com/id/49162890 - -

I am torn between buying now or keep renting. The cost of living in Austin has substantially increased over the last 5 to 6 years.

I”m a renter, and every year the rent increases. My housing rental has gone up 30% since 2008.

More and more people move to Texas looking of jobs. Unfortunately, everyone wants to be near downtown in Austin, and many are willing to pay the premium (ie me).

I currently pay $1700 in rent; buying a similar unit in the same building would be around $300k plus $300 HOA / month. Assuming a 20% down payment and taxes ~(2.5%), the monthly payment would be around $1,900 a month.

Prices have been climbing up over the past year specially in the downtown area, and unless something dramatic happens in the economy, I don’t foresee how things are going to change. There is tons of cheap money and investors buying properties cash all over the place.

I think the Obama administration is trying to manipulate the economy to get a boost and get re elected. Thus, I think it may be more prudent to wait until after the elections to make a big purchase.

Thoughts?

With so much great news on the housing front, I can’t understand why the Wall Street bulls aren’t celebrating?

U.S. new-home prices jump

Sales of newly built homes in the U.S. fell slightly in August as prices posted a record 11.2% gain, but demand remained near a two-year high.

MONETARY POLICY
QE3 — the headache

Latest Fed easing may cause problems for countries grappling with inflation and could also prompt China to press ahead with reforms.

Signs point to crisis in Salem’s (Oregon) housing market
Foreclosures change lives

http://www.statesmanjournal.com/apps/pbcs.dll/article?AID=2012309260118&adjusted=1

Weedman, 55, works for Gorilla Capital, a Eugene-based company that’s one of the nation’s largest purchasers of homes sold at foreclosure auction. Gorilla Capital buys, renovates, and sells hundreds of homes. It’s a rare example of success emerging from the deflated housing bubble.

Although statistics show improvement in the housing market, long-term joblessness, a sharp drop in homeowner wealth, and municipal finances drained by falling property taxes will hurt the state’s economy for years.

….In Oregon, construction employment went from a near record 110,800 jobs in 2007 to 75,600 jobs as of August of this year. More than 10,230 Oregon home foreclosures were completed in the 12 months ending in July, according to CoreLogic, a provider of business analytics. Nationally, 794,744 foreclosures were completed in the same period.

And home equity now accounts for the smallest share of net wealth since record keeping began in 1945, according to Harvard University researchers.

How The Housing Recovery Will Take Shape In Coming Months

http://www.forbes.com/sites/morganbrennan/2012/09/26/heres-how-the-housing-recovery-will-take-shape-in-coming-months/

More good news on the home front. The latest S&P/Case-Shiller Home Price Index indicates that home prices gained 1.6% in July compared to a year earlier. Every city tracked in the 20-City Composite has seen prices rise for three straight months and 16 of the 20 cities saw year-over-year increases. “The positive news in both the monthly and annual rates of change in home prices over the past few months signals a possible recovery in the housing market,” noted David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, in a statement.

Blitzer is the latest housing expert to toss around the “r” word. Last week, for example, the National Association of Realtors reported that existing home sales climbed about 9% nationally in August from a year earlier. “The housing market is steadily recovering with consistent increases in both home sales and median prices,” explained Lawrence Yun, chief economist of NAR.

A growing pile of data indicates that that national-level recovery is solidifying into a reality (albeit one taking dramatically different shape on a more local level across the country).

Wow,
“President” AhhmnadedinehJehade of Iran is speaking to the UN. That dude knows how to spin BS.

Low-wage work force grows 30% as the number of jobs shrinks

BY FRANCINE KNOWLES Business Reporter fknowles@suntimes.com September 26, 2012 1:04AM

Low-wage workers in Chicago are better educated, older and rely more on that income these days to meet basic needs than 10 years ago.

And there are substantially more of them.

That’s according to a new report released by Chicago-based Women Employed and Action Now Institute that shows nearly one in six low-wage workers here last year held a college degree.

The report, authored by Marc Doussard, assistant professor in the University of Illinois at Urbana-Champaign’s Department of Urban and Regional Planning, defines low-wage workers as those making $12 an hour or less.

The report revealed the share of payroll employees ages 18 to 64 working in low-wage jobs rose from 23.8 percent in 2011 to 31.2 percent last year. That’s a more than a 30 percent rise in the proportion of such workers.

Meanwhile the share of households with a low-wage earner that got all income from low-wage earnings rose from 45.7 percent to 56.7 percent. That’s evidence more people are relying more on those dollars to meet basic needs rather than for disposable income.

The report is “compelling evidence that as the number of jobs shrinks, people are forced to chase lower and lower paying jobs,” Doussard said. “I think this is a wake up call, and I think we need to acknowledge that low-wage jobs used to be the exception to the rule of an economy that produced a lot of mid- and higher-wage job opportunities. Increasingly low-wage jobs are the rule. This is not something that happens on the margin of the economy.”

Amie Crawford and Ricardo Hardin are among Chicagoans struggling in such low-wage jobs. Hardin, who holds a bachelor’s degree in business management and an associates in criminal justice, has only been able to land a job as a shoe salesman making $8.25 an hour, he said.

“I’m having a hard time keeping afloat,” said Hardin, age 30. “It’s rough. I met a couple of college people besides myself with degrees on my job.

“I had great expectations. I thought I would be able with my degree to at least make anywhere from $45,000 to $50,000 a year and I wouldn’t have to worry about making ends meet. At this point it’s not working as I thought it would be.”

Crawford worked 35 years as an interior designer, where her salary in recent years was $50,000 a year. She moved to Chicago nearly a year ago after her husband moved here and she thought she’d be able to find a job in her field making a similar salary. But she’s since separated from her husband, and after months of looking for work, she was only able to land a job making $8.25 an hour at a quick-service restaurant in the Loop.

“The biggest impact it’s having is I’m having to draw from my retirement savings to make ends meet on a no-frills budget,” and that’s something that she can’t do indefinitely, said Crawford. “If my situation doesn’t change, I’ll have to move and maybe live with my sister. The prospects aren’t good if something doesn’t change.

Among steps the report recommends policymakers take to address the problem are raising the state’s minimum wage, which is currently $8.25 an hour, and adopting living-wage ordinances. The report adds “legislation that strengthens collective bargaining rights, paid sick time, enforcement of anti-discrimination and fair labor standards laws and efforts by employers to improve scheduling and promote training and mobility… are also crucial.

http://www.suntimes.com/business/15379932-420/low-wage-work-force-grows-30.html - -

I know it`s not SNARP

Maybe it`s WHARP?

Maybe it`s election time.

Claims Filing Period for Hispanic and Women Farmers and Ranchers Who Claim Past Discrimination at USDA to Open on September 24, 2012

Those Eligible Must File Claims No Later Than March 25, 2013

Espanol

WASHINGTON, Sept. 24, 2012- Agriculture Secretary Tom Vilsack today announced that Hispanic and women farmers and ranchers who allege discrimination by the USDA in past decades can file claims between September 24, 2012 and March 25, 2013.

“Hispanic and women farmers who believe they have faced discriminatory practices from the USDA must file a claim by March 25, 2013 in order to have a chance to receive a cash payment or loan forgiveness,” said Secretary Vilsack. “The opening of this claims process is part of USDA’s ongoing efforts to correct the wrongs of the past and ensure fair treatment to all current and future customers.”

The process offers a voluntary alternative to litigation for each Hispanic or female farmer and rancher who can prove that USDA denied their applications for loan or loan servicing assistance for discriminatory reasons for certain time periods between 1981 and 2000.

As announced in February 2011, the voluntary claims process will make available at least $1.33 billion for cash awards and tax relief payments, plus up to $160 million in farm debt relief, to eligible Hispanic and women farmers and ranchers. There are no filing fees to participate in the program.

The Department will continue reaching out to potential Hispanic and female claimants, around the country to get the word out to individuals who may be eligible for this program so they have the opportunity to participate.

Call center representatives can be reached at 1-888-508-4429. Claimants must register for a claims package (by calling the number or visiting the website) and the claims package will be mailed to claimants. All those interested in learning more or receiving information about the claims process and claims packages are encouraged to attend meetings in your communities about the claims process and contact the website or claims telephone number.

Website: http://www.farmerclaims.gov

Phone: 1-888-508-4429

Claims Period: September 24, 2012 - March 25, 2013.

Independent legal services companies will administer the claims process and adjudicate the claims. Although there are no filing fees to participate and a lawyer is not required to participate in the claims process, persons seeking legal advice may contact a lawyer or other legal services provider.

Under Secretary Vilsack’s leadership, USDA has instituted a comprehensive plan to strengthen the Department as a model service provider and to ensure that every farmer and rancher is treated equally and fairly as part of “a new era of civil rights” at USDA. This Administration has made it a priority to resolve all of the past program class action civil rights cases facing the Department, and today’s announcement is another major step towards achieving that goal. In February 2010, the Secretary announced the Pigford II settlement with African American farmers, and in October 2010, he announced the Keepseagle settlement with Native American farmers. Both of those settlements have since received court approval. Unlike the cases brought by African American and Native American farmers, the cases filed by Hispanic and women farmers over a decade ago were not certified as class actions and are still pending in the courts as individual matters. The claims process provides a voluntary alternative to continuing litigation for Hispanic and female farmers and ranchers who want to use it.

Audio and video public service announcements in English and Spanish from Secretary Vilsack and downloadable print and web banner ads on the Hispanic and women farmer claims process are available at: http://www.usda.gov/wps/portal/usda/usdahome?contentidonly=true&contentid=PSAs_Print_and_WebBanner_Ads.xml

The following leaders have released statements on the opening of the Hispanic and Women Farmer and Rancher claims process:

Raul M. Grijalva, Representative (D-AZ)

“Southern Arizonans may have some of the strongest claims out there on this compensation, and I encourage everyone to exercise their full legal rights in seeing that justice is served. …The economy is rebounding and people are looking to build their family businesses again, and I applaud USDA officials for seeking to right a historic wrong at the right time.”

John Salazar, Colorado Commissioner of Agriculture

“I am pleased to learn that the voluntary claims process has begun by USDA to help resolve discrimination complaints of Hispanic and women farmers. While I recognize not all claims will be resolved through this process the President and his administration deserve credit for taking steps to resolve for many their longstanding claims based on past discrimination.”

http://www.usda.gov/wps/portal/usda/usdahome?contentid=2012/09/0309.xml&contentidonly=true - 40k

“John Boyd, put the number of black farmers in America at 18,000.”

“To date, more than 94,000 individuals have filed discrimination claims.”

Pigford II settlement to black farmers to be opposed by Republicans in the House

Published: 3:25 AM 11/23/2010

Despite numerous allegations of fraud, the Senate approved legislation by a voice vote Friday to fund $1.15 billion worth of settlements to black farmers who claim the U.S. Department of Agriculture discriminated against them.

The legislation now makes its way to the House, where Republican Reps. Michele Bachmann of Minnesota, Steve King of Iowa, and Bob Goodlatte of Virginia have made it clear that they will be pushing hard to prevent its passage and will be calling for investigations into every claim prior to allowing any payoffs.

Much of the cause for concern is the fact that there have been vastly more claims of discrimination than there are even black farmers in America. Sworn testimony before the House Judiciary Committee by the president of the National Black Farmers Association, John Boyd, put the number of black farmers in America at 18,000.

To date, more than 94,000 individuals have filed discrimination claims.

This is the second payoff from a 1999 class action settlement, known as Pigford vs. Glickman, in which the original plaintiff Timothy Pigford, along with 400 others, sued USDA for discrimination in its allocation of loans. The plaintiffs won, but since then, the number of claimants have vastly ballooned to unanticipated levels.

Over $1 billion has already been paid out to over 16,000 people, and this second round is expected to pay off an additional estimated 70,000 – 80,000 who missed the deadline to file their initial claims.

King told The Daily Caller that the process by which the money has been allocated is flawed.

http://dailycaller.com/2010/11/23/pigford-ii-settlement-to-black-farmers-to-be-opposed-by-republicans-in-the-house/ - 85k

The NAR is nothing but a terrorist organization and spends millions each year on political lobbying efforts to push their agenda.

So, serious question: What happens to the money that was invested in mortgages gets repaid by a refinance (which is driven by lower rates caused by the Fed buying mortgages)?

I see two options:

1. The money goes back into mortgages, further putting downward pressure on mortgage rates;
2. The money that was interested in a mortgage at 4.5% (last year), isn’t interested in a mortgage at 3.5%, and flows elsewhere;

I personally think the answer depends on the answer to this question:

Where did the money come from to begin with?

If it came from people who were not satisfied with other government backed securities (treasuries), but wanted the safety of the government backstop, then they pile back into mortgages until the yield on the 30-year treasury is virtually the same as the yield on a 30-year mortgage backed security. Right now, we have less than 75 basis points to go…what then?

If it came from people looking because of the risk adjusted return (regardless of needing the safety of government guarantee), at what point do they go elsewhere? Where to they go?

If the Fed drives 30-year loans to parity with the 30-year treasury, but wants to further ease, where do they go?

Once again the world progresses without the US.

http://www.nytimes.com/2012/09/27/business/beyond-wall-st-curbs-on-high-speed-trading-advance.html?pagewanted=all&_moc.semityn.www

Industry leaders and regulators in several countries including Canada, Australia and Germany have adopted or proposed a wide range of limits on high-speed trading and other technological developments that have come to define United States markets.

1 in 4 jobs in San Diego is tied to the defense industry. Sequestration is going to hurt the city.

Cilck on my name for the UT story that ran today.

Home prices will be falling as more and more good payinig jobs go away. In San Diego its all being done quietly, did you hear about the defense contractor I work for lay off 450+ corporate (high salary) jobs last month? I didn’t think so… we’ve closed half our offices here we were the #1 employer in San Diego a decade a go (not counting the Navy)….Stay classy San Diego.

Posted: 2:17 p.m. Wednesday, Sept. 26, 2012

Study shows pension woes here to stay in Florida

By John Kennedy

Palm Beach Post Capital Bureau

TALLAHASSEE —
Municipal pension plans are stretching thinner in Florida as a smaller workforce supports a growing number of retirees — with prospects bleak that funds will recover, a report released Wednesday concludes.

The Leroy Collins Institute’s latest review of the plans found that while the sluggish economy has contributed to the funds’ problems, deeper woes plague them.

“These municipal pension issues were not created overnight and can’t be changed overnight,” said David Matkin, a public administration professor at Florida State University, who studied Florida’s 492 municipal pension plans for the Tallahassee-based institute.

The problems track those facing the Social Security system or Medicare: Too few workers supporting a growing number of retirees. If anything, municipal budget cuts and layoffs in recent years have contributed to the imbalance, analysts said.

The result: city commissioners must earmark a larger share of municipal budgets for pension benefits. That means citizen services decline, Matkin said.

“They take up a space that is demanded by other services,” Matkin said. “You have to have some budgeting tradeoffs.”

A report released last November by the Leroy Collins Institute gave mixed reviews on the health of pension plans in 100 Florida cities, with one-third drawing ‘D’ or ‘F’ grades for being underfunded. In Palm Beach County, plans in six cities earned failing, or near-failing grades.

Boynton Beach’s police plan and Palm Beach Gardens’ police and fire pensions were among the 15 percent of municipal plans drawing F’s. Various Plans in Riviera Beach, Boca Raton, Jupiter, Boynton Beach and Lake Worth earned D’s in the Collins Institute analysis of financial strength.

LPS Home Price Index data released today:

http://www.lpsvcs.com/LPSCorporateInformation/NewsRoom/Pages/20120926.aspx

This is for July sales and is based on a repeat sales analysis (like Case Shiller). The main difference between this and Case Shiller is that Case Shiller is a 3-month average, so their July number includes data from June and May.

ft dot com
Last updated: September 26, 2012 11:17 pm
QE3 triggers fear of new currency wars
By Alice Ross

Fear has crept into the foreign exchange markets: fear of central banks. Currency traders are rapidly shifting assets to countries seen as less likely to try to weaken their currencies, amid concern that the fresh round of US monetary easing could trigger another clash in the “currency wars”.

Fund managers are rethinking their portfolios in the belief that “QE3” – the Federal Reserve’s third round of quantitative easing – will weaken the dollar and trigger sharp gains in emerging market currencies. Such moves would cause a headache for central banks worried about the domestic impact of a strengthening local currency, leading to possible intervention.

Some investors are allocating money towards countries with beaten-up currencies, such as India or Russia, or those with more benign central banks, such as Mexico, that do not have a history of frequent forex intervention.

Currencies whose central banks have either intervened or threatened to intervene since QE3 have been underperforming the US dollar as investors have steered clear.

The Czech koruna is the worst-performing major currency against the dollar since QE3 was launched this month, according to a Bloomberg list of expanded major currencies. The governor of the Czech central bank last week raised the prospect of forex intervention as a tool to stimulate the economy.

The Brazilian real is also weaker in the past two weeks after Guido Mantega, finance minister, made it clear that the government would defend the real from any fresh round of currency wars sparked by the Fed’s move.

Even the Japanese yen is weaker against the dollar overall since the Fed’s move, despite having clawed back all its losses after the Bank of Japan’s move to add to its bond-buying programme last week.

Currency desks at Baring Asset Management and Amundi are avoiding the Brazilian real, which the country’s central bank keeps managed at around R$2 against the US currency, and are instead buying the Mexican peso, where the central bank has signalled it is happy for the currency to appreciate further.

James Kwok, head of currency management at Amundi, said: “Mexico is an emerging market currency many managers like as they believe the central bank won’t intervene. The Singapore dollar and the Russian rouble are managed by a range, instead of one-way direction, and so are also good candidates for QE play.”

He is concerned that another “big scale” intervention from Tokyo is on the cards after the BoJ failed to weaken the yen substantially this month, and is avoiding the currency as a result.

Currency intervention has been a growing concern for forex investors, with many now scrutinising the history of a central bank’s interventions before deciding whether to invest.

“We definitely take the intervention risk into account when investing in a currency,” says Dagmar Dvorak, director of fixed income and currency at Barings. “In Asia, intervention risk is fairly high. We have still got positions in the Singapore dollar but remain cautious on the rest of the region.”
…

To Mr. Bernanke

You have been lucky. Your dollar has held up well despite all of your printing.

Joe Investor, Germany, will get 1.5% interest on his deposits in the USA.

And will repatriate about 90 cents equivalent a year from now !

I wonder how much longer you will be lucky, Mr. B.

So how many of you ObamaBots are going to go poof and disappear along with your house pimping after the election?

Interesting week here at the HBB. Wow.

“Comment by ahansen
2012-09-26 12:18:41

If there was one thing I learned from the house fire”

Bear, house fire… have you ever seen the movie Unbreakable? Perhaps you’re a superhero and you have yet to realize it?

Some red meat served up for the HBB crowd, if there is anyone left awake:

“PHOENIX (CBS5) -

We now have the video showing a woman getting tased as Maricopa County sheriff’s deputies try and evict her from her home.”

http://www.kpho.com/story/19610542/cbs-5-news-obtains-video-of-woman-being-tased-evicted

How to Create the Best QE3 REIT Portfolio
By Brad Thomas 09/24/12 - 09:53 AM EDT

NEW YORK (TheStreet) — Last week’s announcement by the Federal Reserve was significant news for real estate investment trust investors. Not because short-term interest rates will be held low for years, nor because of QE3 — “quantitative easing,” round 3.

The announced QE3 news merely commits $40 billion a month of new stimulus funds — a significant wad of cash. Slightly unexpected was the announced use of that money: to buy Fannie Mae and Freddie Mac bonds in an effort to keep mortgage rates low and pump up the housing market. The idea here: to eliminate housing debt so that Americans will be able to pick up their spending and revive the economy.

After nearly four years of ultra-low interest rates and a tripling of the Federal Reserve’s balance sheet — but with little progress on reducing the unemployment rate — the Fed has once again come to the rescue (by a vote of 11 to 1).

How Does the Fed’s Easing Plan Benefit Mortgage REITs?

See if (NLY) is in our portfolio

Mortgage REITS, particularly agency REITs, continue to provide suitable income for investors seeking good risk-adjusted returns; however, a decline in agency mortgage REIT dividends — the result of narrower spreads — could keep many investors on the sidelines.

Annaly Capital Management (NLY), Capstead Mortgage (CMO), Hatteras Financial (HTS), ARMOUR Residential REIT (ARR) and CYS Investments (CYS) are among the agency mortgage REITs that announced lower dividends for the quarter ended Sept. 30 compared to the prior quarter.

Since the Federal Reserve announced QE3, new 30-year, fixed-rate MBS have fallen in yield by about 30 basis points. To counteract the narrower spread, agency mortgage REITs could increase leverage, but the current environment is too risky to do so, as rising interest rates could lower the value of their holdings and extend the portfolio’s duration.

Agency mortgages are guaranteed by government-sponsored entities (implying limited credit risk). Conversely, non-agency securities do not carry a similar implied guarantee, making them inherently more risky due to the higher relative credit risk.

A mortgage REIT creates value for shareholders in two primary ways: 1.) growing book value and 2.) generating consistent income for distributions. Mortgage REITs are not for every investor and the following REITs have historically offered the best value to investors: American Capital Agency (AGNC), Annaly Capital, Anworth Mortgage (ANH), Capstead Mortgage and Hatteras Financial.

How does the Fed’s new easing benefit equity REITs?

The Federal Reserve’s latest round of money stimulus and extended low interest rates should bolster real estate valuations and provide a tailwind for equity REITs amid gradually improving fundamentals. The fundamentals — gradual recovery in jobs and housing — indicate a poised pattern of slow economic growth.
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http://www.ritholtz.com/blog/2012/09/fisking-mcardle/