March 1, 2013

Weekend Topic Suggestions

Please post topic ideas here!

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Comment by frankie
2013-03-01 05:13:05

Euro area unemployment rate at 11.9%
EU27 at 10.8%
The euro area
(EA17) seasonally-adjusted
unemployment rate was 11.9% in January 2013, up from 11.8% in
December 2012. The EU27 unemployment rate was 10.8%, up from 10.7% in the previous month. In both zones,
rates have risen markedly compared with January 2012, when they were 10.8% and 10.1% respectively. These figures are published by
Eurostat, the statistical office of the European Union. Eurostat estimates that 26.217 million men and women in the EU27, of whom 18.998 million were in the euro area, were unemployed in January 2013. Compared with December 2012, the number of persons unemployed increased by 222 000 in the EU27 and by 201 000 in the
euro area. Compared with January 2012, unemployment rose by
1.890 million in the EU27 and by 1.909 million in the euro area.
Among the Member States, the lowest unemployment rates were recorded in Austria(4.9%),Germany and Luxembourg(both 5.3%)
and the Netherlands(6.0%), and the highest in Greece(27.0% in November 2012),Spain(26.2%) and Portugal(17.6%).
Compared with a year ago, the unemployment rate in
creased in nineteen Member States, fell in seven and
remained stable in Denmark. The largest decreases were observed in
Estonia(11.1% to 9.9% between December 2011 and December 2012),
Latvia(15.5% to 14.4% between the fourth quarters of 2011 and 2012),
Romania(7.4% to 6.6%) and the United Kingdom(8.3% to 7.7% between November 2011 and November 2012). The highest increases were registered in Greece(20.8% to 27.0% between November 2011 and November 2012), Cyprus(9.9% to 14.7%), Portugal(14.7% to 17.6%) and
Spain(23.6% to 26.2%)

Still inflation is down to 1.8%in the Euro zone.

Comment by frankie
2013-03-01 09:44:52

Apologies posted in wrong place.

Comment by frankie
2013-03-01 05:15:29

Steve Bell on David Cameron and the EU plan to tax bankers’ bonuses - cartoon

Comment by Cantankerous Intellectual Bomb Thrower™
2013-03-01 09:40:38

Is now the time to buy U.S. stocks, before the boom prices you out forever?

U.S. Stocks Erase Losses as Data Offset Spending Cuts

By Sarah Pringle & Corinne Gretler - Mar 1, 2013 7:45 AM PT

U.S. stocks erased losses, after an early decline in the Standard & Poor’s 500 Index, as better- than-estimated data on consumer confidence and manufacturing tempered impending federal spending cuts.

The S&P 500 slipped less than 0.1 percent to 1,514.47 at 10:43 a.m. in New York, after declining as much as 0.9 percent earlier. The Dow Jones Industrial Average rose 5.45 points, or less than 0.1 percent, to 14,059.94. Trading in S&P 500 companies was in line with the 30-day average at this time of day.

“Many market observers have been expecting that the budget cuts will take effect,” said Andreas Nigg, head of equity and commodity strategy at Vontobel Asset Management in Zurich. “It appears that the U.S. economy has enough momentum, but a weakening macro backdrop just at the point when sequestration starts would be cause for concern.”

Comment by Cantankerous Intellectual Bomb Thrower©
2013-03-01 11:13:44

Dollar gains, U.S. shares rebound on data
By Herbert Lash
NEW YORK | Fri Mar 1, 2013 12:57pm EST

(Reuters) - Global equity markets fell and the euro slumped to a two-month low on Friday as weak economic data from Europe and China weighed on prices, but Wall Street stocks rebounded on news of surprisingly strong U.S. manufacturing and consumer sentiment.

Government bonds rallied and the dollar rose in safe-haven buying as concerns about imminent U.S. spending cuts and the post-election political stalemate in Rome remained major headwinds for risky assets.

The pace of growth in U.S. manufacturing, which rose at its fastest rate in over a year and a half in February, offset some jitters. The Institute for Supply Management said its index of national factory activity rose to 54.2 from 53.1 in January, topping economists’ forecasts for a pullback to 52.5.

“A very impressive ISM number with the only caution being a decline in employment though still in expanding territory,” said David Ader, head Of government bond strategy at CRT Capital Group in Stamford, Connecticut.

Another sign of optimism was a report that showed U.S. consumer sentiment rose in February as Americans were more hopeful that the jobs market will improve, even as confidence in fiscal policy was near all-time lows.

While economic data from Europe and China was disappointing, there are clear signs of economic recovery in the United States and some evidence that Japan is beginning to turn around, a potential swing factor in 2013, said Andrew Milligan, head of global strategy at Standard Life Investments in Edinburgh.

Comment by whyoung
2013-03-01 09:50:54

Two part question”
1)What would houses cost WITHOUT the mortgage interest tax deduction?
How much of a premium have people been “pricing in” historically?
2)What is the real social benefit (if any) of the deduction?

Comment by Carl Morris
2013-03-01 10:00:02

2)What is the real social benefit (if any) of the deduction?

It’s one of the most perfect gifts to the rich ever devised. The real social benefit is that the middle class gets to think that they are a favored class and acts/votes accordingly even though they are actually being given little or no favor.

Comment by tresho
2013-03-01 12:23:18

Thinking that they are a favored class and acts/votes accordingly even though they are actually being given little or no favor — applies to most of the electorate, middle class or not.

Comment by Blue Skye
2013-03-01 20:30:31

I don’t think the MID was designed as a gift to the rich. It is a leftover from the era where all interest was deductable, as if it was a sort of casualty like medical expenses. The rich actually had money, rather than being rich by borrowing lots of money. I used the interest deduction decades ago, and then the MID when the tax laws changed. I was never “rich”.

It will go away because the DC Tick needs more, more, more.

Comment by polly
2013-03-01 11:07:16

Despite Aid, Borrowers Still Face Foreclosure

(and despite the title, this is about the banks and the settlement with them as loan servicers/owner, not the borrowers)


Just under 71,000 borrowers, or 13 percent of the total borrowers helped so far, received assistance on their primary mortgage, which has been the main source of defaults and foreclosures through the housing crisis. But more than 170,000 homeowners received assistance on their second mortgage, which typically is a home equity line of credit that borrowers can tap for cash.

While the second lien deal often does not help borrowers, it does benefit the banks, according to Mark Ladov, a lawyer at the Brennan Center for Justice at New York University School of Law. When a house is sold at foreclosure, there is typically no money to pay the second mortgage anyway. Routinely, the holder of the second loan gets nothing. Under the terms of the settlement, though, the banks receive credit for forgiving the second mortgage even though they most likely would not have gotten any money for it.

Comment by polly
2013-03-01 11:30:12

High & Low Finance
Easing U.S., Slowly, Out of Home Financing By FLOYD NORRIS
Published: February 28, 2013

Sorry, this needs the whole article. I don’t usually do this, but NYT is behind a firewall, so here it is:

Can the American mortgage market ever function again without Uncle Sam guaranteeing that lenders will be repaid?

It is amazing just how few people think it can.

“For the foreseeable future, there is simply not enough capacity on the balance sheets of U.S. banks to allow a reliance on depository institutions as the sole source of liquidity for the mortgage market,” stated a report on the American housing market this week, issued by a group that was filled with members of the housing establishment.

The panel, which included Frank Keating, the president of the American Bankers Association and a former governor of Oklahoma, does not see that as an indictment of the American banking system, which would much rather trade leveraged derivatives than keep a lot of mortgage loans on its books.

“Given the size of the market and capital constraints on lenders, the secondary market for mortgage-backed securities must continue to play a critical role in providing mortgage liquidity,” added the report, issued by a housing commission formed by the Bipartisan Policy Center, a group that was begun by former Senate majority leaders from both parties. The group thinks investors will not be willing to finance enough mortgages — particularly 30-year fixed-rate loans — without a government guarantee.

The report does an excellent job of analyzing the history of the American housing finance system, as well as looking at the government’s efforts over the years to promote and subsidize rental housing. It calls for changes in those policies as well, aimed at assuring that those with very low incomes “are assured access to housing assistance if they need it.”

But those rental proposals are unlikely to lead to legislation any time soon, said Mel Martinez, one of four co-chairmen of the housing panel. Mr. Martinez, a former Republican senator from Florida and housing secretary under President George W. Bush, said in an interview that any proposal calling for spending government money, as this one does, would face tough sledding in Congress.

But he said it was possible that changes in the housing finance system, which is widely criticized on both sides of the aisle, had a better chance of getting approval.

Certainly, one principle enunciated by the panel will get wide support: “The private sector must play a far greater role in bearing housing risk.” But the details show that the panel still thinks sufficient money can be found for housing only if Uncle Sam remains the ultimate guarantor for most home mortgages.

Currently, the government backs about 90 percent of newly issued mortgages, more than ever before. The proportion fell in the years leading up to 2007 as subprime loans proliferated and then soared after that market collapsed.

Since then, the Federal Housing Administration has expanded its role in backing home loans on the low end of the scale. But most mortgages are purchased by either Fannie Mae or Freddie Mac, the government-sponsored enterprises that the government took over after the housing bubble burst.

So-called jumbo mortgages, that is, mortgages too large to qualify for purchase by Fannie or Freddie, account for most of the rest. Some mortgages are put into securitizations that have no government guarantee, but many jumbo mortgages end up being owned by the banks for the long term.

The F.H.A. appears to be more cautious than it used to be. The report notes that last year the average FICO score for an F.H.A. or Department of Veterans Affairs loan was close to 720 on a range of 300 to 850. That is about what the average Fannie Mae and Freddie Mac borrower had in 2001.

The commission, whose other co-chairmen were George J. Mitchell, the former Senate Democratic leader; Christopher S. Bond, a former Republican senator; and Henry Cisneros, who served as housing secretary under President Bill Clinton, wants to preserve the F.H.A., but orient it more to those who need the most help. It would phase out Fannie and Freddie — something that is politically necessary — but replace them with something that sounds sort of similar.

The new organization would be called a “public guarantor.” It would guarantee that investors in mortgage-backed securitizations would not lose money, much as Fannie and Freddie now do. But its responsibility would come after that of a “private credit enhancer,” which sounds like a monoline insurer that would make payments to securitization holders if the underlying mortgages were performing badly. That organization would be regulated by the public guarantor, and only after it goes broke — something that should happen only if housing prices fall more than they did in the recent crisis — would the public guarantor be responsible for making investors whole.

The public guarantor would only guarantee mortgage securitizations, not issue them as Fannie and Freddie do. But it would regulate the issuance. It would collect a guarantee fee, as would the “private credit enhancer,” which the commission says would raise the cost of mortgages to some extent.

In addition, the commission foresees lowering the maximum loan size that the government will guarantee, thus pushing more loans into the genuinely private market. Mr. Martinez said he thought that eventually the F.H.A. would be guaranteeing 10 to 15 percent of new mortgages, and the public guarantor would back another 35 to 45 percent, leaving 40 to 50 percent to be financed exclusively by private capital without any government guarantee.

Back in the 1980s, Mr. Martinez said, something like 75 percent of all loans were made by banks that held on to them. Why can’t we go back to something like that?

There seem to be two reasons. The first is that bank regulators would have to push the banks hard to devote capital in that way. As it happens, the politicians who most dislike government involvement in the mortgage market also don’t like regulation.

The second reason is that banks learned some lessons in the 1980s. When that decade began, there was a group of banks, called thrifts, whose primary purpose was to make long-term, fixed-rate mortgage loans. Such loans left the lender with a lot of interest rate risk. That is because a 30-year mortgage can be repaid at any time. If rates go down, homeowners will refinance. If rates go up, they will not.

When the Federal Reserve Board under Paul Volcker pushed interest rates to high levels that bankers had never thought possible, a lot of banks were left with assets — mortgage loans — paying lower rates of interest than the banks had to pay for deposits. That was a recipe for going broke, and many did. Congress then made it worse by saying the banks could invest in higher-risk assets, while engaging in accounting tricks to mask the fact they were insolvent. The result was that more banks went under, and by the end of the cycle there was no longer a group of banks dedicated to home loans.

Mortgage securitizations found ways to slice up the cash flows from a group of mortgages in ways that persuaded private investors to shoulder the interest rate risk. But the commission says there is not enough private capital willing to take on both the interest rate risk and the credit risk of homeowners defaulting. Hence the public guarantor.

Could Congress get the government out of financing homes for normal, creditworthy borrowers? The answer is that to do so the country would probably have to move away from 30-year fixed-rate mortgages, going instead to adjustable-rate mortgages that would leave homeowners facing higher monthly bills when rates rose.

In the end, we can have a government-dominated mortgage system, with the risks inherent in that — risks that we saw in the need to bail out Fannie and Freddie. Or we can abandon the 30-year fixed-rate mortgage, leaving homeowners at risk when rates rise, as they are in much of the world. But it is hard to see how we can have it both ways.

Comment by polly
2013-03-01 12:29:13

Here’s a link to the report itself:

The recommendations of BPC’s Housing Commission are the culmination of a 16-month process that engaged the housing community both inside and outside of the Beltway through a series of roundtable discussions and regional housing forums.

Comment by Cantankerous Intellectual Bomb Thrower©
2013-03-01 11:50:19

Is the housing bubble back, or is it over?

Or would it be more accurate to say that, thanks to hair-of-the-dog housing market stimulus measures, it never ended (yet)?

Comment by Cantankerous Intellectual Bomb Thrower©
2013-03-01 11:52:19

This article’s discussion suggests the housing bubble is history, rather than ongoing.

Stefan Karlsson
US savings rate falls to housing bubble lows

The US savings rate fell from 6.4 percent to 2.4 percent in January, and it will take a few months to see if it recovers to normal levels.

By Stefan Karlsson, Guest blogger / March 1, 2013

A customer counts his cash at the register while purchasing an item at a Best Buy store in Flushing, New York. The US savings rate fell dramatically in January 2013, but it may be in relation to December 2012, when savings were boosted in anticipation of higher tax rates.

The U.S. savings rate fell dramatically in January, from 6.4% to 2.4%. This mostly reflected the fact that income and savings was temporarily boosted in December by advance salary and dividend payments in anticipation of higher tax rates, but it also seems that for January, Ricardian equivalence was mostly confirmed.

Indeed, one could argue that it was entirely confirmed as spending didn’t fall at all, while the savings rate fell sharply not only from the December level but also from the levels earlier in 2012. However, as some of the salary and dividend payments that were made in advance in December would have normally been made in January, it would seem that underlying income (and therefore also savings) was probably somewhat higher than formal income. We will have to wait a few more months to see if the savings rate recovers.

If it doesn’t, then it is at a ominously low level, as the household savings rate was 2-2.5% during the housing bubble, the same level as in January.

Comment by Cantankerous Intellectual Bomb Thrower©
2013-03-01 11:53:42

February 28, 2013 5:05 PM

Is China’s real estate bubble about to burst?

The biggest housing bubble in history created by China’s rapid growth and the massive investment in real estate by its burgeoning middle class may be about to burst. One of the country’s leading commercial real estate moguls, Zhang Xin, tells Lesley Stahl that residential property development has reached the end of the road. And with the prices of millions of existing housing units falling since last year, China’s largest residential builder, Vanke Chairman Wang Shi, tells Stahl he is seeing protests from angry investors and fears an Arab Spring-like uprising if the bottom falls out of the market. Stahl’s report will be broadcast on 60 Minutes, Sunday, March 3 at 7:00 p.m. ET/PT.

Comment by Cantankerous Intellectual Bomb Thrower©
2013-03-01 11:55:44

Global housing crisis: Australia, Canada and UK face common questions

Western countries are tackling similar housing problems, but some have adapted to a new environment more easily

Duncan Maclennan and Sharon Chisholm
Guardian Professional, Wednesday 27 February 2013 10.00 EST

Toronto skyline CN tower

Toronto, Canada: the country shares common housing problems with the UK – but has found some effective answers. Photograph: Nathan Bergeron

Now is the deepest winter of discontent in UK housing for 30 years. Half a decade of recession and credit rationing have depressed housing values and reduced market investment to the lowest levels in half a century. Public investment has been slashed, and the flow of new housing, especially for the poorest households, has slowed to a trickle. The next half decade offers the prospect of continuing market sluggishness and deepening cuts in investment and welfare budgets.

Increased government investment is needed, but there is unlikely to be any fast return to large-scale public funds for housing, even as the economy recovers. With rising household numbers and stagnant incomes, the gap between provision and needs is growing alarmingly, and if austerity continues, so will the housing crisis.Badly designed housing policy exacerbates the effects of deep cuts. However, there is still hope for a better housing system in Britain.

Comment by Cantankerous Intellectual Bomb Thrower©
2013-03-01 11:59:15

nhz, wherefore art thou?

Dutch house price drop third biggest in EU since crisis began
Thursday 31 January 2013

Spain and Ireland are the only two countries in Europe where house prices have fallen more sharply than in the Netherlands over the past four years, according to Dutch national statistics agency CBS.

After reaching a peak in 2008, Dutch and Spanish house prices have been going down every year, but in Europe as a whole, prices have stabilised, the CBS told news agency ANP. The drop in Spain is around 7% a year, in the Netherlands 4%.

New figures from European statistics office Eurostat on Thursday show house prices across the EU went down an average 2.5% in the third quarter of last year, compared with the year-earlier period.

The drop in the Netherlands was 8.7%, in Spain 15% and Ireland almost 10%. By contrast, house prices in Norway and Estonia rose nearly 8.5%.

Comment by Cantankerous Intellectual Bomb Thrower©
2013-03-01 15:05:56

Does the Fed use standard asset pricing theory in its analysis?

Bernanke Says Fed Examining Possible Asset-Price Bubbles
By Craig Torres - Feb 27, 2013 9:17 AM PT

Federal Reserve Chairman Ben S. Bernanke said the central bank is looking into whether asset- price bubbles may be forming in some financial markets as a result of a prolonged period of low interest rates.

The potential for bubbles is a “cost to these policies, and one that we take very seriously,” he said in Washington today in response to questions from members of the House Financial Services Committee.

The Fed chairman said the central bank is looking at the conditions behind asset markets, such as whether prices are rising in the context of higher leverage or whether these assets are owned by institutions that could jeopardize the broader economy if prices fall.

The Fed has held the benchmark lending rate near zero since December 2008, encouraging investors to seek higher yields in riskier securities. The central bank is also keeping rates low on mortgage-backed securities and longer-term Treasury debt, buying $85 billion a month of the securities in a third round of quantitative easing.

“We are examining this with a great deal of care,” Bernanke said. “Interest rates are low for a good reason.”

Comment by Neuromance
2013-03-01 11:57:24

“At the core of every mania is the belief that an asset - physical or financial - which is rapidly increasing in price, will do so indefinitely. And at a “significant” rate. An asset on which one cannot avoid making a profit upon the sale of it.”

With Dutch tulip bulbs, or stocks, once this belief takes hold widely in a large enough number of people, a mania forms.

At the core of a mania, is this magical asset.

Is the housing bubble a mania? If so, how is the housing bubble similar to, and different from, previous manias?

Has there ever been an asset which is believed never to go down in price, which has not sparked a mania? An asset which simply has a steady, high level of demand?

What about an asset which meets a physical need, like shelter? Other mania assets, like tulip bulbs or stocks, are not necessities.

Comment by ahansen
2013-03-01 12:09:41

While I don’t wish this coming denouement on anyone, there’s a part of me that thinks it’s high time America, the country, gets a taste of its own medicine. The United States of America has been inflicting itself on the rest of the planet throughout my entire lifetime, always justifying its uncivilized activities as “promoting liberty and freedom” or “making the world safe for democracy” or some such vague sloganeering to cover its rapacious greed.

It has derided the voices of conscience as “commies”, “peaceniks”, and most recently,”liberals” (as if that were somehow a bad thing), and branded those of us with the temerity to call out our government’s thirty-year economic war on the middle class as “unpatriotic”. All while ignoring the philosophical inconsistencies of their professed ideology courtesy of a feckless (if not criminally complicit) mass media.

I gave up playing Cassandra decades ago when I realized where Reaganomics was taking us, but there is truly no excuse for the excess wrought by the turn-of-the-millennial cronyism and war-mongering that ruined our nation and looted our treasury while everyone was distracted by rhetoric and “reality” circuses.

I tell people who “want their country back”, “You wanted your war of revenge, you wanted your cheap crap from China, you wanted quick riches and easy credit. You got it. Now you get to pay for it. Not ‘the government’ and not ’someday’. You. Now.”

Welcome to the new austerity.

Comment by X-GSfixr
2013-03-01 12:34:06

Forget it. You are wasting your time.

I’ve been telling everyone since 1980 that handing over half the US auto market to the Japanese, Germans and Koreans free of charge was going to have some very bad consequences.

Forget the UAW. I’m talking about all of the engineering, sub contractors, and supplier jobs that have disappeared. Their disappearance has led to higher costs in other industries, like aviation.

BMW essentially filled the market spot formerly occupied by Pontiac, Audi and Lexus the spot of Oldsmobile.

(I always found it funny that people said one of GMs problems was “too many brands selling the same car”, but it wasn’t a problem for Toyotas to be relabeled Lexus and Scion)

Part of this was the Big 3s fault. Part of it was currency manipulation. And part of it was a decision by Wall Street and Washington to sacrifice US manufacturing workers to support development of our “allies” (first, then later “adversaries” like the PRC) for geopolitical reasons.

Remember “offsets” back in the 70s? When our “allies” demanded that a share of the manufacturing and intellectual property (usually paid for by US taxpayers, either directly by government contracts, or indirectly, by tax deductions/tax breaks to corporations), in exchange for orders?

Comment by aNYCdj
2013-03-01 18:53:24

I would be happy if ohbewanna and holder would go after John Corzine. who stole money from Farmers

instead the scumballs go after aaron swartz for downloading documents..

Comment by Blue Skye
2013-03-01 20:51:06

There is that word “austerity”. I’m familiar with frugality. I’m familiar with derth, lack, shortage, coffee is for closers. But austerity? I think in Govspeak that “austerity” means some nation has to start paying back debts, or at least slow their rate of borrowing, or at very least slow the rate of increase of their borrowing. As long as the Fed is the global lender of last resort, there will be no austerity here. Like we are going to pay our debts?

Comment by Cantankerous Intellectual Bomb Thrower©
2013-03-01 12:31:14

Whatever happened to the discussion of limiting the MID?

Comment by Cantankerous Intellectual Bomb Thrower©
2013-03-01 12:32:37

March 1, 2013, 9:22 a.m. EST
The return of interest-only mortgages
These loans promise low monthly payments, but plenty of risks
By AnnaMaria Andriotis

Affluent borrowers are signing up for the same type of mortgage that pushed many homeowners into foreclosure just a few years ago.

Interest-only mortgages, in which borrowers pay interest but no principal during the first few years of the loan, are attracting buyers who like the lower monthly payments—and can divert the savings to income-generating investments.

Lenders say these borrowers are attracted to the loans’ low monthly payments, which can be 30% to 40% lower than regular mortgages. And with interest rates near record lows over the past year, these loans have become even cheaper.

Interest-only mortgages accounted for about 14% of private mortgage originations from January 2012 through October, according to the latest data from CoreLogic, a real-estate analytics firm. (Private loans are mostly held on lenders’ books rather than sold to government-backed agencies.)

Comment by polly
2013-03-01 13:23:51

Extremely affluent buyers - ones who could pay off the mortgage in cash with only perhaps needing a few days to liquidate some publicly traded shares to do it - are the only ones who ever should have been able to get a loan that wan’t fully amortizing. Those loans were made for people who don’t need a loan to buy a house at all but want them for some other reason (not wanting to liquidate thoses shares or whatever other reason they have).

The problem is when a person who actually needs a loan gets offered a financial “product” that isn’t appropriate for them.

Comment by Cantankerous Intellectual Bomb Thrower©
2013-03-01 13:54:44

To what extent are these affluent interest-only borrowers signing up to claim the MID for the interest-only payments on up to $1m worth of principle?

(Comments wont nest below this level)
Comment by polly
2013-03-01 14:49:31

Probably entirely. Deductible interest is better than not deductible interest if you are playing that game. But that is the problem of the rules of/existance of the MID, not the fact that a bank is willing to lend money to people who don’t need it requiring them to presently pay only the interest with a balloon payment at a later time.

Comment by Rental Watch
2013-03-01 15:44:01

I actually disagree with you on the rationale by the wealthy that are borrowing against unencumbered homes today. If they were going out and getting fresh loans today, it is not for the MID (if it was for the MID, they would have already had the loan).

If you have a big net worth, and lots of securities, you can borrow interest only, deductible money cheaply…it’s called a margin line. Yes, you need to trace the debt to investments, but you can deduct the investment interest against investment income…which such a big net worth, wealthy person has–that margin line interest is deductible for them, just like the MID.

Those that I know who are borrowing against their house but don’t need to are not doing it for the MID.

They are doing it because their margin line is a floating rate loan, as would be most interest-only mortgages. When they borrow against their house, most are doing so with a fixed-rate, 30 year, fully amortizing mortgage, and they are doing so because it is the cheapest, long-term fixed rate financing they have ever seen.

With a disfunctional government running massive deficits, and a Fed with their thumb mashed on the “print money” button, they expect inflation within a decade, and they will be able to lock in their borrowing cost for some of the leverage in their world, and pay back the borrowings with inflated dollars over the next 30 years. And even if they don’t get the inflation they expect, 3.5%-4% money is still pretty darn cheap.

Comment by Cantankerous Intellectual Bomb Thrower™
2013-03-01 23:40:23

“But that is the problem of the rules of/existance of the MID,…”

Agreed. I didn’t mean to seem to be blaming the banks for it…

Comment by ahansen
2013-03-01 16:11:35

We finally started doing it today. Next year maybe we can sequester another 10%.

Comment by Cantankerous Intellectual Bomb Thrower©
2013-03-01 14:56:25

No sooner than one budget crisis is left unresolved, another one is underway.

New budget crisis begins after Washington fiscal talks fail
By Richard Cowan and Jeff Mason
WASHINGTON | Fri Mar 1, 2013 4:30pm EST

(Reuters) - The U.S. government stumbled headlong on Friday toward wide-ranging spending cuts that threaten to hinder the economic recovery, after President Barack Obama and congressional leaders failed to find an alternative budget plan.

Put in place during a bout of deficit-reduction fever in 2011, the automatic cuts can only be halted by agreement between Congress and the White House.

A deal proved elusive in talks at the White House on Friday as expected, meaning that government agencies will now begin to hack a total of $85 billion from their budgets between Saturday and October 1.

Democrats predict the cuts, known as “sequestration,” could soon cause air traffic delays, furloughs for hundreds of thousands of federal employees and disruption to education.

While the International Monetary Fund warned that the belt tightening could slow U.S. economic growth by at least 0.5 of a percentage point this year, that is not a huge drag on an economy that is picking up steam.

Obama was resigned to government budgets shrinking.

“Even with these cuts in place, folks all across this country will work hard to make sure that we keep the recovery going, but Washington sure isn’t making it easy,” he said after meeting Republican and Democratic congressional leaders.

At the heart of Washington’s persistent fiscal crises is disagreement over how to slash the budget deficit and the $16 trillion national debt, bloated over the years by wars in Iraq and Afghanistan and government stimulus for the ailing economy.

Comment by Cantankerous Intellectual Bomb Thrower©
2013-03-01 15:11:19

Druckenmiller Sees Storm Worse Than ’08 as Seniors Steal
By Katherine Burton - Mar 1, 2013 12:39 PM PT

Stan Druckenmiller, one of the best- performing hedge fund managers of the past three decades, has a warning for the youth of America: Don’t let your grandparents steal your money.

Druckenmiller, 59, said the mushrooming costs of Social Security, Medicare and Medicaid, with unfunded liabilities as high as $211 trillion, will bankrupt the nation’s youth and pose a much greater danger than the country’s $16 trillion of debt currently being debated in Congress.

“While everybody is focusing on the here and now, there’s a much, much bigger storm that’s about to hit,” Druckenmiller said in an hour-long interview with Stephanie Ruhle on Bloomberg Television’s Market Makers. “I am not against seniors. What I am against is current seniors stealing from future seniors.”

Druckenmiller said unsustainable spending will eventually result in a crisis worse than the financial meltdown of 2008, when $29 trillion was erased from global equity markets. What’s particularly troubling, he said, is that government expenditures related to programs for the elderly rocketed in the past two decades, even before the first baby boomers, those born in 1946, started turning 65.

Comment by Rental Watch
2013-03-01 15:50:58

Now that Wall Street has shrugged off the sequester as a non-event, and Obama has dialed back the fearmongering rhetoric related to the impact of the sequester, will Obama accept the Republican offer that would allow him to reapportion the cuts as he sees fit, rather than continue to let the cuts continue on a pretty indiscriminate basis?

Other than playing politics at the expense of the more deserving programs (and to the benefit of the less deserving programs), what would be his basis for NOT accepting the offer?

Comment by tresho
2013-03-01 15:53:15

Did Mayor Michael Bloomberg really say this recently?:

When it comes to the United States federal government, people do seem willing to lend us an infinite amount of money.

Comment by cactus
2013-03-01 20:38:19

whats up with this

“At the moment it’s a seller’s market again,” said David Fogg, a real estate agent in Burbank, CA. “Very low inventory, very low interest rates, almost no bank inventory of homes, it’s crazy out there. Every good property I’ve listed this year has brought 10-50 offers and sales prices 10-20 percent over comps. Cash is King.”

Nearly one third of all existing home sales in January were paid for in cash, and not just by investors, who are making up a shrinking share of the market. Fierce competition is forcing buyers to use every advantage, given that so many are going after so little.

In California’s San Fernando Valley there are usually over 9,000 homes for sale this time of year, according to real estate agent Billy Wynn. Today there are just over 1,400.

“Realtors are getting so many offers they are taking the homes off the market and not accepting additional offers before any offer is even accepted,” said Wynn. “This is real estate bubble 2.0 on steroids.”

It is a puzzling situation, given all the warnings of a tsunami of so-called “shadow inventory” that was supposed to be flooding the market right now. As it stands, fewer distressed properties are coming to the market.

Comment by ahansen
2013-03-01 23:13:03

Syndicated money searching, desperately, for a safe haven. I’d lay even odds it’s mostly real estate “professionals” trading the best of the dregs amongst themselves.

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