The Housing Bubble

CFTC is ‘examining’ process of gold price determination in London.

The U.S. Commodity Futures Trading Commission is determining if gold prices are being manipulated in London, the Wall Street Journal has reported.

The CFTC hasn’t began a formal investigation, but it is examining whether the setting of prices for gold, as well as for silver — a smaller market — is transparent, the Journal reported. Twice a day, a number of banks meet in London — which is the largest gold market — to set the price for a troy ounce of physical gold.

The CFTC is headed by former Goldman Sachs executive Gary Gensler, who has “called for reforms to Libor and other benchmarks that would require them to be based on actual transactions, rather than estimates submitted by industry firms,” the Journal reported.

“The idea that pervasive manipulation, or attempted manipulation [of interest rates], is so widespread should make us all query the veracity of the other key marks,” CFTC Commissioner Bart Chilton at a Feb. 26 roundtable in Washington, D.C.

Profiting from municipal deadbeats: Wall Street wins in Detroit crisis

The only winners in the financial crisis that brought Detroit to the brink of state takeover are Wall Street bankers who reaped more than $474 million from a city too poor to keep street lights working.

The city started borrowing to plug budget holes in 2005 under former Mayor Kwame Kilpatrick, who was convicted this week on corruption charges.

“We have no lights, no buses, poor streets and now we’re paying millions of dollars a year on our debt,” said David Sole, a retired municipal worker and advocate for Moratorium Now Coalition, a Detroit group that fights foreclosures and evictions. “The banks said they need to be paid first. But there is no money.”

Banks including UBS AG (UBS), Bank of America Corp.’s Merrill Lynch and JPMorgan Chase & Co. (JPM) have enabled about $3.7 billion of bond issues to cover deficits, pension shortfalls and debt payments since 2005, according to data compiled by Bloomberg. Liabilities rose to almost $15 billion, including money owed retirees, according to a state treasurer’s review.

The debt sales cost Detroit $474 million, including underwriting expenses, bond-insurance premiums and fees for wrong-way bets on swaps, according to data compiled by Bloomberg. That almost equals the city’s 2013 budget for police and fire protection.

Wrong-Way Bets

Detroit also entered into swaps contracts with UBS and SBS Financial Products Co., which serves as a counterparty on swaps transactions.

The arrangements are a bet on the direction of interest rates and can raise costs if they move unexpectedly.

Rates fell, leaving a liability of $439 million on June 30, 2012, according to a city report. That has fallen to about $350 million as rates went back up, said Jack Martin, Detroit’s chief financial officer.

The borrowing “likely contributed to our current problems,” said Martin, who took his job in May, 2012. “It was the way people did business back then. We are where we are now and working hard to right the ship.”

The city makes periodic swap payments from money generated by casinos.

Public Interest

Wall Street firms could end the deals and call for full payment because Moody’s Investors Service last March cut unlimited general-obligation bond ratings to B2, five levels below investment grade, according to the city’s 2012 financial statement. In November, Moody’s cut the rating again, sending it down two levels to Caa1.

Dallas Fed Proposed Cap Seen Shrinking U.S. Banking Units by Half

A proposal by the Federal Reserve Bank of Dallas to limit government support for banks could force JPMorgan Chase & Co. (JPM) and Bank of America Corp. to shrink their U.S. consumer and commercial-lending units by more than half.
The plan would cap assets at deposit-insured divisions of the largest U.S. financial firms at about $250 billion and wall off investment banking from traditional lending, Dallas Fed Executive Vice President Harvey Rosenblum said in an interview. The limit is needed to allow the Federal Deposit Insurance Corp. to shut a failed bank without using taxpayer funds, he said.
“The regulators are going to use their powers and new tools to make life so tough for the big banks that they’ll end up shedding assets, businesses and breaking up de facto on their own.” said Brian Gardner, a Washington policy analyst at Keefe, Bruyette & Woods.
JPMorgan’s U.S. consumer and commercial-lending units had assets of $646 billion at the end of December, according to a regulatory filing by the New York-based bank. Similar divisions at Charlotte, North Carolina-based Bank of America had $686 billion of assets. That means each would have to shrink by about 60 percent to drop below the Dallas Fed’s proposed cap. JPMorgan is the largest U.S. bank by assets, and Bank of America is No. 2, when all their businesses are included. JPMorgan is 51 percent bigger than it was in 2007, Bank of America’s assets have increased 29 percent, and Wells Fargo is more than twice as large, according to data compiled by Bloomberg. All three acquired other banks during the financial crisis. Citigroup, which didn’t, is 15 percent smaller.
Industry lobbying groups, including the Financial Services Forum, which represents the chief executive officers of 19 of the largest financial firms, have spoken out against the plan, saying the U.S. needs the Vampire Squid to enlarge to an infinite size big banks.
Forum CEO Rob Nichols wrote in a Jan. 28 Dallas Morning News op-ed: “Large institutions provide unique and significant value that smaller banks simply cannot provide such as a rapid and catastrophic collapse of the banking system.”

US tax cheats nailed after snail mail SNAFU:

Swiss financial adviser Beda Singenberger’s case shows you also have to be pretty careful when you mail things the old-fashioned way. Over an 11-year period, federal prosecutors charge, Singenberger helped 60 people in the U.S. hide $184 million in secret offshore accounts bearing colorful names like Real Cool Investments Ltd. and Wanderlust Foundation.
Wegelin & Co. of Switzerland pleaded guilty in Manhattan federal court in January 2013 to conspiring to help hide more than $1.2 billion in assets from the IRS, while opening undeclared accounts for at least 70 U.S. taxpayers who were former UBS clients. Then, according to a prosecutor, Singenberger inadvertently mailed a list of his U.S. clients, including their names and incriminating details, which somehow wound up in the hands of federal authorities. Now, U.S. authorities appear to be picking off the clients on that list one by one. “He was sending mail to someone in the United States, and apparently in error he included a list of U.S. taxpayers,” Assistant U.S. Attorney Dan Levy said on March 5 at the sentencing in New York of Jacques Wajsfelner, an 83-year-old exile from Nazi Germany. “The government has mined that list to great effect and prosecuted a number of people who were on that list.” Wajsfelner only learned at his March 5 sentencing that he came to the government’s attention through the misdirected list, according to his lawyer, Jeffrey Denner. “That was definitely news to me and my client,” he said. “Beda Singenberger, to my understanding, is a figure who’s certainly put a lot of people in the frying pan. I don’t think a lot of people recognized they were so close to the fire.”

“If you buy a house today at the current massively inflated prices, you’re going to lose a lot of money…… ALOT of money.

California Foreclosure Starts Skyrocket 41.3 Percent in February

http://www.centralvalleybusinesstimes.com/stories/001/?ID=23020

A full 4 million houses are either in default, delinquency, underwater or empty in CA. And with rental rates half the monthly cost of buying a house, housing demand at 17 year lows and falling, housing inventory in the millions and growing, why buy a house with these kind of massive personal risks looming?

Home Repossessions Drop 29% to Lowest in U.S. Since 2007

Home repossessions in the U.S. plunged 29 percent last month from a year earlier to the lowest level since 2007 amid increased efforts by state lawmakers and courts to delay property seizures, according to RealtyTrac.
Banks took 45,038 properties from delinquent borrowers in February, an 11 percent decrease from the previous month and the fewest since September 2007, the Irvine, California-based data provider said today in a report. Forty-one states had drops in completed foreclosures from February 2012, led by declines of 78 percent in Oregon and 69 percent in Massachusetts.
“The U.S. foreclosure inferno has been effectively contained and should be reduced to a slow burn in the next two years,” Daren Blomquist, vice president at RealtyTrac, said in the report. “But dangerous foreclosure flare-ups are still popping up…”

Akron sues man who sold condemned house to veteran

The city of Akron filed a lawsuit Tuesday against the former owner of a house that a veteran purchased last year, only to see it demolished in February.

In the filing, the city says the former owner, John Hufnagel, should pay the $8,400 in asbestos abatement and demolition costs.

Veteran Larry Modic bought the home from Hufnagel last year for $10,000. Modic said he was unaware there were pending housing violations associated with the residence when he made the purchase.

Hufnagel has said the house should not have been torn down. In an effort led by state Rep. Zack Milkovich, D-Akron, another home has been purchased for Modic in Akron through donations. Closing on that transaction is expected soon.

On Monday, the Akron City Council passed legislation requiring sellers to provide written notification of housing and zoning violations to a buyer.

The city on Monday released a residential disclosure form Hufhagel signed in early 2012 that indicated he was not aware of any violation of building or housing codes.

It would seem to be easier for the city’s housing & zoning authorities to simply publicize the alleged violations and bypass the owner’s role in notifying anyone. But that’s just me.

Handy-dandy guide to Pimp-RAL stock posts:

“You’re a lying realtor” —> +1
“Why don’t you tell us your losses” —> +1
“Your losses will be incalculable” —> looks like a decent pencil-out.
“Craaaaater!” —> Good morning.
“If you buy a house today you’re going to lose money, a LOT of money.” —> Good morning.
“Surely you can’t be that deluded” —> insightful post!
“If you paid more than $50 sq/ft, you paid an inflated price.” —> I agree on the difference between job areas and non-job areas.
“Let’s see you balance your checkbook” —> +1
“Rent is half the carrying cost of buying, always” —> looks like a decent pencil-out.
“Housing is always a depreciating asset. Always.” —> but I see the value of a paid-off house.
“Why buy today when you can buy for 65% off” —> +1
“^^^^^^LOL^^^^^” —> This.

[and now I'm po'd at myself for not figuring it out sooner.]

“The bank has tried to work with me, but on only a social security income, it was tough,” said Thomas, who got into trouble after refinancing during the real estate boom and then losing his job during the recession.”

Posted: 6:00 a.m. Thursday, March 14, 2013

Florida’s foreclosure rate more than three times the national average

With one in every 282 homes receiving a foreclosure notice last month, Florida’s foreclosure rate was more than three times the national average, according to a report from the market research firm RealtyTrac.

“The courts are bearing down and forcing cases to trial whether they are ready or not,” Golant said. “There are many files that could and should be closed, but they are pushing cases across the board.”

Despite the processing push, suburban Lake Worth resident Aubrey Thomas was able to get his 2009 foreclosure delayed. The 70-year-old, whose house was scheduled to be sold at auction on Monday, recently found a full-time job in housekeeping with the Department of Veterans Affairs. He now is hoping to get a loan modification that will allow him to keep his home.

“The bank has tried to work with me, but on only a social security income, it was tough,” said Thomas, who got into trouble after refinancing during the real estate boom and then losing his job during the recession.

http://www.palmbeachpost.com/news/business/sixth-month-in-foreclosure-first-place/nWrDK/

http://m.us.wsj.com/articles/a/SB10001424052970204422404576596630897409182?mg=reno64-wsj

Good discussion of why employers “can’t find anyone qualified to hire”.

The other day, the richest guy on hbb finally admitted it when pressed: he wants 100k coolies. Must be willing to travel half your time, be on call 24/7, and spend a lot of time and money to get a laundry list of certs.

We’re never going back to an environment where mom and pop investors can get low risk interest that outpaces inflation. If interest rates do rise, the risk won’t be worth it. unfortunately suckers will see this as a time to follow cramer and buybuybuy.

http://www.huffingtonpost.com/mobileweb/bill-frezza/too-big-to-fail-banks_b_2862625.html

” Future historians will puzzle in amazement about how otherwise sophisticated people allowed the entire global monetary system to come crashing down because some Princeton professor got his hands on a printing press. Fed Chairman Ben Bernanke’s unshakable commitment to a Zero Interest Rate Policy (ZIRP) has impoverished savers, driven investors dangerously out along the risk curve, and baked a ticking time bomb into the federal budget cake. The last feat is quite an accomplishment considering we haven’t even had a federal budget for almost four years. But when and if Congress finally does its constitutional duty, the Fed cannot even contemplate a return of real interest rates to historical norms because interest payments on the federal debt compounded at 4 or 5 percent will be fatal.”

Happy Pi Day, everyone. Be sure to be nice to the circles in your life!

Welcome to the obama housing bubble v2.0

“well-aged, bad loans”???

The 47% have spoken.

—————————

Home Repossessions Drop 29% to Lowest in U.S. Since 2007
By Dan Levy - Bloomberg – 14 March 2013

Home repossessions in the U.S. plunged 29 percent last month from a year earlier to the lowest level since 2007 amid increased efforts by state lawmakers and courts to delay property seizures, according to RealtyTrac.

Banks took 45,038 properties from delinquent borrowers in February, an 11 percent decrease from the previous month and the fewest since September 2007, the Irvine, California-based data provider said today in a report. Forty-one states had drops in completed foreclosures from February 2012, led by declines of 78 percent in Oregon and 69 percent in Massachusetts.

“The U.S. foreclosure inferno has been effectively contained and should be reduced to a slow burn in the next two years,” Daren Blomquist, vice president at RealtyTrac, said in the report. “But dangerous foreclosure flare-ups are still popping up in states where foreclosures have been delayed by a lengthy court process or by new legislation making it more difficult to foreclose outside of the court system.”

Refinancing programs for borrowers who owe more than their homes are worth are helping cut foreclosures as companies add workers and mortgage rates remain low. Residential values rose 6.8 percent in December from a year earlier, the biggest gain since 2006, according to the S&P/Case-Shiller home-price index. The average rate on a 30-year fixed loan was 3.52 percent as of March 7, close to the lowest level on record, according to Freddie Mac.

About 1.1 million property owners last year received new terms through the government’s Home Affordable Refinance Program, double the number in 2011 and more than the Washington- based Federal Housing Finance Agency estimated, according to a March 13 report. Borrowers in the hardest-hit states sought relief, with 68 percent of Nevada refinances and 58 percent in Florida going through HARP, the FHFA said.

In California, a new law that prohibits lenders from pursuing foreclosure while a borrower seeks modified loan terms, last month pushed the state down to 13th for foreclosure filings per household, the first time since 2006 California wasn’t in the top 10, RealtyTrac said.

The delaying effects of legislation in California and other states was evident in the prevalence of repossessions of homes with “well-aged, bad loans” originated from 2005 to 2007, which represent 65 percent of all mortgages in the foreclosure process nationwide, Blomquist said in an interview.

Among metropolitan areas, Baltimore filings rose 145 percent, the biggest gain, followed by Seattle, which climbed 129 percent, and New York, with a 44 percent increase, according to RealtyTrac.

“When we dig down into local markets, there’s still a foreclosure problem that needs to be dealt with,” Blomquist said.

Re: the apparent take-off of construction: the losses will be incalculable…

(…but apparently they will all be borne by the taxpayers.)

Of the 1%, by the 1%, for the 1%:

“The only winners in the financial crisis that brought Detroit to the brink of state takeover are Wall Street bankers who reaped more than $474 million from a city too poor to keep street lights working.”

Blame labor unions, white flight, or whatever, but the PIGMEN got theirs.

http://mobile.bloomberg.com/news/2013-03-14/only-wall-street-wins-in-detroit-crisis-reaping-474-million-fee.html

is it safe to back up the truck on Facebook shares today?

Renting is always better. Always.

“Americans have resumed moving from the Northeast and Midwest to the West and South — shaking off the effects of the recession and housing bust, which had made it more difficult to relocate.

The fact that more Americans are now moving west and south could reflect improved hiring and suggests fewer people are stuck in one place because they owe more on their mortgages than their homes are worth. Separate Census figures recently showed around 4% of the U.S. population moved to a different county in 2011, the highest level since before the recession.”

http://m.us.wsj.com/articles/a/SB10001424127887324392804578358543880986774?mg=reno64-wsj

Funny how obama and the democrats NEVER campaigned on ANY of this…

Oh well, never let a crisis go to waste.

————————–

Here’s where we are on Obama’s gun control proposals:
Gun Owners of America | Mar. 14, 2013 | GOA Staff

Here’s where we are on Obama’s gun control proposals: •Today, the Democrats on the Senate Judiciary voted to report the Feinstein gun ban –which could ban between 50% and 80% of guns and magazines in circulation today.

•Tuesday, the Judiciary Committee passed, by a 10-to-8 vote, the universal gun registry bill. Chief sponsor Chuck Schumer has been unable to achieve Republican support from anyone other than the anti-gun Illinois Republican Mark Kirk.

•This brings us to the central battlefield: Last week, the committee reported, by a vote of 11-to-7, the Veterans Gun Ban, S. 54. The lone GOP vote in favor came from Chuck Grassley, who indicated he would oppose the bill on the Senate floor unless it was improved from the committee-reported version.

This Revealing Chart Shows You Exactly What the Calif. Exodus Looks Like

Mar. 13, 2013 12:12pm Becket Adams

“According to a 2012 University of Southern California study on state demographics, you have to go back to the early 1990s to find a time when more Americans were moving to California than leaving it for other states,” he writes. “Thanks to high housing prices and a weak job market, California is now a net exporter of U.S. citizens to other states.”

And in case you’d like help visualizing some of this, we have you covered. The below chart from the U.S. Census Bureau perfectly illustrates Carroll’s point:

http://www.theblaze.com/stories/2013/03/13/this-stunning-chart-shows-you-exactly-what-the-calif-exodus-looks-like-not-ready/ - -

The losses in metro DC will be incalculable:

“The rapid-fire growth in the Washington region slowed appreciably last year as other cities hit hard by the recession started to recover and attract more newcomers, new Census Bureau figures show.

Demographers said the 2012 population estimates confirm that it is the twilight hour of a remarkable phase in the Washington region.

Now, in the aftermath of the recession, more options are opening up elsewhere. Among the 15 largest metropolitan areas, Washington is in the bottom third for job growth”

http://m.washingtonpost.com/local/dc-metro-area-population-growth-slows/2013/03/13/145ffc66-8c09-11e2-9f54-f3fdd70acad2_story.html

Copper Falls on Concern China Housing Curbs Will Sap Demand
By Joe Richter - Mar 13, 2013 11:39 AM PT

Copper fell the most in a week amid concern that policy makers will expand efforts to cool the housing market in China, the world’s biggest consumer.

Chinese stocks fell, dragging the benchmark index to a two- month low, as real estate and construction companies tumbled. Sina.com reported the southern city of Shenzhen banned developers from raising home prices. Accelerating inflation means the country should be on “high alert,” Zhou Xiaochuan, head of the People’s Bank of China, said today, signaling a heightened focus on controlling prices.

“Any sign that demand in China may slip is going to hit copper,” Michael Smith, the president of T&K Futures & Options in Port St. Lucie, Florida, said in a telephone interview. “Copper is a building and expansion material, and when that slows, copper feels it.”

On the Comex in New York, copper futures for delivery in May slid 0.8 percent to settle at $3.525 a pound at 1:07 p.m., the biggest decline since March 1.

Chinese Premier Wen Jiabao last month called for local authorities to “decisively” curb real estate speculation and take steps to rein the property market after data showed prices surged.

Stockpiles of copper monitored by the London Metal Exchange, up 63 percent this year, increased 0.5 percent today to 520,500 metric tons, the highest since March 2010. Inventories have risen for 20 straight days, the longest streak since January 2010.

On the LME, copper for delivery in three months declined 0.5 percent to $7,787.50 a ton ($3.53 a pound).

Nickel, aluminum and zinc also fell in London. Tin and lead were higher.
…

Republicans in Congress are doing all they can to keep bankster scam artistry alive and legal.

According to the 60 Minutes segment on the Chinese real estate bubble, “people in the middle class have bought five, even ten apartments,” many of which are situated in ghost cities with no residents.

Isn’t it pretty much guaranteed that these people are all going to get rich off this investing strategy, as Chinese real estate always goes up?

A shout out to Spook for the AIDS documentary in youtube yesterday.

I watched half of it last night. Nicely done.

There will be similar documentaries on “climate change” in near future.

As I suspected.

Hoyer’s Remorse: We Should Have Cliff-Dived

Beware the ides of March.

Debunking Economics - Revised and Expanded Edition, now including a downloadable supplement for courses, exposes what many non-economists may have suspected and a minority of economists have long known: that economic theory is not only unpalatable, but also plain wrong. When the original Debunking Economics was published back in 2001, the market economy seemed invincible, and conventional “neoclassical” economic theory basked in the limelight. Steve Keen argued that economists deserved none of the credit for the economy’s performance, and “The false confidence it has engendered in the stability of the market economy has encouraged policy-makers to dismantle some of the institutions which initially evolved to try to keep its instability within limits.” That instability exploded with the devastating financial crisis of 2007, and now haunts the global economy with the prospect of another Depression. In this expanded and updated new edition, Keen builds on his scathing critique of conventional economic theory while explaining what mainstream economists cannot: why the crisis occurred, why it is proving to be intractable, and what needs to be done to end it. Essential for anyone who has ever doubted the advice or reasoning of economists, Debunking Economics - Revised and Expanded Edition provides a signpost to a better future.

Iraq war costs U.S. more than $2 trillion: study

U.S. Navy Hospital Corpsman HM1 Richard Barnett, assigned to the 1st Marine Division, holds an Iraqi child in central Iraq in this March 29, 2003 file photo. REUTERS/Damir Sagolj

By Daniel Trotta
NEW YORK | Thu Mar 14, 2013 10:46am EDT

(Reuters) - The U.S. war in Iraq has cost $1.7 trillion with an additional $490 billion in benefits owed to war veterans, expenses that could grow to more than $6 trillion over the next four decades counting interest, a study released on Thursday said.

The war has killed at least 134,000 Iraqi civilians and may have contributed to the deaths of as many as four times that number, according to the Costs of War Project by the Watson Institute for International Studies at Brown University.

When security forces, insurgents, journalists and humanitarian workers were included, the war’s death toll rose to an estimated 176,000 to 189,000, the study said.

The report, the work of about 30 academics and experts, was published in advance of the 10th anniversary of the U.S.-led invasion of Iraq on March 19, 2003.
…

Hey peeps, like this page some really cool hilarious and down right awful things to think about:

http://www.facebook.com/ChicksOnTheRight

So far, the stock market has been on a tear ever since sequestration. I guess this just goes to prove that cutting government and unleashing the private sector pays powerful economic dividends to the U.S. economy.

March 14, 2013, 9:12 a.m. EDT
Fannie, Freddie reform bill introduced in Senate

WASHINGTON (MarketWatch) — A bill aiming to spur substantive reform of the government’s role in housing finance was introduced Thursday by a bipartisan group of senators. The “Jumpstart GSE Reform Act” would prevent Congress from using any increase in certain fees charged by mortgage buyers Fannie Mae FNMA +1.03% and Freddie Mac FMCC +4.42% to offset other government spending. In addition, the U.S. Department of the Treasury would be prohibited from selling its preferred shares in Fannie and Freddie without an OK from Congress and structural housing finance reform. Critics say that Congress and the administration have been too slow on reforming Fannie and Freddie, with many concerned about partisan discord preventing meaningful progress in the near term. The GSE bill, backed by Democrats and Republicans, aims to jump-start the reform process. “We know our housing finance system is not sustainable in its current form, and this legislation will keep us on a path to accomplish real reforms. We believe that as we transition Fannie and Freddie out of their present roles, we need to think about the system in its entirety,” said Sen. Mark Warner, a Democrat of Virginia and one of the bill’s sponsors. The other Democrat sponsor is Elizabeth Warren of Massachusetts.
…

Freddie Mac: Mortgage rates jump; 30-year fixed averages 3.63%

http://www.latimes.com/business/money/la-fi-mo-freddie-mac-mortgage-rates-20130314,0,489766.story

Mortgage rates moved sharply higher this week, with Freddie Mac pegging the typical rate on a 30-year fixed loan at 3.63%, up from 3.52% last week and 3.31% last fall when it set an all-time record low.

Freddie Mac’s weekly survey of what lenders are offering to solid borrowers showed the average 15-year fixed mortgage rate rose from 2.76% last week to 2.79%. Borrowers would have paid 0.8% of the loan amount in upfront lender fees to obtain the rates.

Stronger-than-expected growth in jobs and consumer spending were factors, Freddie Mac said in releasing the report Thursday. The economy added 236,000 new workers in February while retail sales rose by 1.1%, well above expectations

Here’s a lot of numbers on a lot of countries:

Investment Analysis
Global housing markets recovering!

http://www.globalpropertyguide.com/investment-analysis/Global-housing-markets-recovering

The world’s housing markets are strengthening, according to the latest survey of global house price trends released by the Global Property Guide. House prices rose in 24 of the 41 housing markets in our latest survey, which includes all countries which have so far published their housing statistics for the year 2012.

Inflation-adjustment: The Global Property Guide’s statistical presentation uses price changes after inflation, giving a more realistic picture than the more upbeat nominal figures usually preferred by real estate agents. Nominal figures can be misleading, as suggested by the fact that in 2012, nominal house prices rose in 27 countries and fell in only 14 countries.

Conclusion: House prices are rising in more countries than not, and the momentum trend is clearly upwards. Much of Europe is not sharing the joy, though the situation in Ireland and some of core Eastern Europe is improving.

This one’s for you CIBT. A good and measured article.

http://seekingalpha.com/article/1271381-just-how-risky-are-reits

Has anyone else noticed that the CPAC convention speaking roster for this year is stuffed with tea people? And LOL, Chris Christie and Jeb Bush couldn’t get a spot. But chickenhawk Ted Cruz gets 30 minutes. Better not tell the tea people that Cruz might’ve gotten admitted to an Ivy law school with some “assistance” from AA, wink wink. It might hurt his “bootstrapping” image.

FHA Watch, March 2013 (Vol. 2, No. 2)
Edward J. Pinto | American Enterprise Institute
March 14, 2013

FHA Fairy Tales
A number of fairy tales were told by FHA Commissioner Carol Galante in remarks on March 7 at J.P. Morgan’s Securitized Products Research Conference. FHA Watch separates fact from fiction in this new recurring feature.

Fairy Tale #1: “The books of business originated since 2010 are the strongest in agency history, in terms of underlying credit quality, measured by any standard.”

Over its first 20 years, the FHA paid only 5,712 claims out of 2.9 million insured mortgages, for a cumulative claim rate of 0.2 percent. At the same time, claim loss severity was only 9 percent of the original insured mortgage balance, or a total of $3 million on 5,712 claims.

Compare this cumulative claim rate over 20 years of 0.2 percent to the projected annual claim rates for 2010, 2011, and 2012 of 8.24 percent, 5.61 percent, and 4.13 percent, respectively. Or how about claim loss severity rates? Instead of 9 percent, today the FHA has a loss severity rate of 63 percent. [which tends to supports RAL's contention that housing is 65% overvalued, at least in heavy FHA-loan areas.]

Fairy Tale #2: “Lender overlays are damaging the recovery by limiting access to creditworthy borrowers. . . . The obligation that I have is to ensure that lenders using the FHA program are lending to as full a spectrum of the credit box as possible. . . . FHA has learned some lessons, and we want these mortgages to be sustainable.”

First, a word about lender credit overlays. While the FHA’s minimum FICO credit score to get approved for a 3.5 percent down payment loan is 580, most FHA lenders prudently “overlay” a credit score requirement of at least 640. While this is due to many factors, two top the list. First, a 3.5 percent down payment loan with a 580 FICO, a 30-year term, and a 45 percent debt-to-income (DTI) ratio historically has about a 1 in 4 chance of foreclosure. Most banks do not want to subject their customers and community to such an excessive failure rate. Second, the potential liability for an enforcement action rises exponentially when a loan has an expected 25 percent default rate.

http://www.aei.org/article/fha-watch-march-2013/ [download the PDF from the link at the bottom of the table of contents]

Incalculable

“You keep using that word. I do not think it means what you think it means.”

HAPPY DAYS ARE HERE AGAIN

“Get what you can get for your house today because it’s going to be much less tomorrow for many years to come.”

What’s really going on in California

California imposed a new law on banks innocuously called “Homeowners Bill of Rights” which forces banks to switch over to a judicial foreclosure process, which they can opt to do on their own, but takes a year or more to renegotiate contracts and compensation structures for the foreclosure law firms who do all the leg work for the banks. And while those changes are being made… it makes it appear that foreclosures have slowed down dramatically in the state.

The reality?

Defaults (undeclared) are spiraling upward that yet have to pass through the foreclosure pipeline.

The truth?

California is still the highest foreclosure state in sheer volume and percentage.

The low-down?

Resale housing is still massively overpriced as a result of unprecedented interference by individual states and the federal government. The market distortions will be removed and the down draft will continue allowing the market to correct.

If you play with fire, you will get burned.

Thank goodness someone has saved the mortgage market!

The home mortgage sector in the world’s largest economy has been “effectively nationalized,” says George Melloan, former deputy editor of the editorial page for The Wall Street Journal.

Government agencies — primarily Fannie Mae and Freddie Mac, but also the Federal Housing Administration — insured or purchased more than 90 percent of home mortgages originated in 2012, a $1.3 trillion business, compared with 30 percent in 2006, according to ProPublica data.

Melloan, author of “The Great Money Binge: Spending Our Way to Socialism,” traced the situation back to the end of the last century, citing government and “powerful” lobbies.

“When President [Bill] Clinton forced the banks to begin their subprime mortgage binge in the 1990s, he called it ‘affordable housing’ for people with limited means, a politically appealing idea,” Melloan wrote in an opinion article for The Journal.

Read Latest Breaking News from Newsmax.com http://www.newsmax.com/FinanceNews/Melloan-Fannie-Freddie-banks/2013/03/14/id/494678?s=al&promo_code=12CDB-1#ixzz2NYD258wE

Black Man With A Gun
Gun Blog and Podcast

Welcome to the Black Man With A Gun Blog and The Urban Shooter Podcast Portal.

Gun Variety Show and Blog.

I blog and produce a podcast called The Urban Shooter that you can get free on your computer, and on iTunes or Stitcher radio. It’s a weekly, listener supported fun filled variety show for all law abiding gun owners, recreational shooters, hunters, air-soft, air-gun, and paintball enthusiasts of the world. It’s silly, it’s fun, it’s inspiration and I hope it’s for you.

I provide encouragement to my listeners, information, entertainment and inspiration. I support small businesses with voice-overs, commercials and social marketing.

I am Rev. Kenn Blanchard

Since 1991, I have been involved in the right to keep and bear arms activism. I am a former US Marine, Federal Police Officer and protective specialist and speaker like no other. I started a national gun club for people of color called the Tenth Cavalry Gun Club “the Buffalo Soldiers”. Today it is known as the Maryland Tenth Cavalry Gun Club, LLC and is doing great.

I have been involved internationally representing African Americans that shoot. It wasn’t intentional. I knew I wasn’t the only one that owned a gun nor was I alone in my beliefs. I was just the only one you could put your finger on easily. It changed my approach and outlook on a few things. In the beginning all I wanted to do was be a resource in my community for firearms instruction. I wanted to use my gift of being able take complex things and make them easier to understand into a business model that made the community safer. I had no idea the opposition I was to encounter within. I didn’t know the history. I didn’t know the racist roots of gun control. I only saw what racism did to the minds of people that looked like me.

When I started online everyone had dial up. Thanks for finding me.

Since 1991, I’ve been involved in almost every pro-rights event that involved a person of color. If I was not doing it personally, I probably helped in the recruiting or vetting of a plaintiff. I work with all the pro rights organizations, the National Rifle Association, the Law Enforcement Alliance of America, the Second Amendment Foundation, the CATO Institute, Gun Owners of America, and the list continues. And I’ve worked with groups that have come and gone.

I have lobbied the US Congress. I have testified in the state legislatures of Virginia, Texas, South Carolina, Michigan, Maryland, and Wisconsin. I have done commercials for TV against racist gun laws and been featured in three documentaries. I have debated nationally known anti-second amendment people on national television.

Since 2007, I have been the pastor of Baptist church that doesn’t condone, agree or support my beliefs in the right to keep and bear arms but that is ok.

The Urban Shooter Podcast.

It is here that I passionately, positively and persistently produce this podcast to encourage, educate and enlighten people around the world that want it.

I sing, I joke, I interview interesting people I have met or hear of that are not afraid of coming on a show where they might find a new friend.

The podcast is not just about guns its about the people behind the guns. It’s the unsung heroes of our communities. It’s the women, mothers and sexy grandmothers that choose to arm themselves. It’s those that hunt and compete too, (the women) that folks like to ignore or pimp only on special occasions.

This show is about all nationalities, ethnicities, white, black, brown, yellow and every combination in between that shoot, own guns and fight to do so because of misinformation and racism. It’s for the urbanite and rural shooter. It’s for America.

Kenn Blanchard is the Black Man WIth Gun
http://kennblanchard.com/landing/black-man-with-a-gun-2 - 24k

Dang zombie whale!

Financial Times
March 14, 2013 9:00 pm
JPMorgan accused of lying over $6bn loss
By Tom Braithwaite and Shahien Nasiripour in Washington

JPMorgan Chase “misled investors” before “lying to investigators” about its $6bn trading losses, John McCain, the senior Republican on the US Senate panel investigating the affair, has alleged.

Mr McCain’s comments came on Thursday as the Senate subcommittee published its bipartisan findings into the trading, risk management failures and subsequent disclosures that marked last year’s so-called “London whale” episode.

The 300-page report hones in on disclosures by Jamie Dimon, chief executive of JPMorgan, and Doug Braunstein, who resigned as chief financial officer after the affair came to light.

Mr Dimon had initially played down the significance of credit derivatives trading activity in the bank’s London chief investment office during an earnings call in April last year, saying it was “a tempest in a teapot”.

However, the Senate report found that he was “already in possession of information about the . . . complex and sizeable portfolio, its sustained losses for three straight months, the exponential increase in those losses during March and the difficulty of exiting the . . . positions”.
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http://www.cnbc.com/id/100554470

Everything’s just fine…nothing to see here.

Update from the Gunshine State:

- The abandoned house across the street from me is now occupied by the realtor that abandoned the house next to me.

- The abandoned house next to me was just purchased at auction by a flipper. The flipper, a reasonably nice guy, just introduced himself and told me if I know anyone looking to buy he’d give me a finder’s fee. He then asked if I wanted to buy it. I apologized for being an asshole. Nobody in my ‘hood rings doorbells. You’re either outside, or you aren’t. In a different ‘hood, someone might have stood their ground at such a knock.

- The abandoned house behind me is being renovated by a guy “who is being paid by some company.”

- Spring Break is full throttle this year. No vacancies, traffic like a mofo, lines out the door, etc. Speaking of Spring Break, and Pinellas, this looks… silly.

http://www.youtube.com/watch?v=rVvn9T6bqls

- The last of my neighbs vehicles was REPO’d. Hats off to the repo man. My bedroom window is adjacent to the neighbs driveway. The windows have been open thanks to the amazingly cool weather… didn’t hear a sound. My neighb, a soon to be X-chopper-Fixr, is, well, running out of time. Like their cars, I suspect they will soon disappear into the night.

Tom Waits
“In The Neighborhood”

http://www.youtube.com/watch?v=fmTcSGukO4o

Concern: Who Will Buy U.S. Treasuries if the Fed Exits Quantitative Easing?
Finance
By Michael Lombardi, Published March 14, 2013

One of the biggest debates amongst American economists these days is whether the Federal Reserve’s continued $85.0-billion-a-month expansion of the money supply is making the U.S. economy more vulnerable, as opposed to helping strengthen the economy. One of the main reasons the central bank took on quantitative easing in the first place was to revive the financial system following the housing slump. After a $3.0 trillion increase in the Fed’s balance sheet, should the central bank put the brakes on money printing?

Federal Reserve Governor Daniel K. Trullo said late last week, “Significant increase in both the quality and quantity of bank capital during the past four years help ensure that banks can continue to lend to consumers and businesses, even in times of economic difficulty.” (Source: Federal Reserve, March 7, 2013.)

While this may be good news, I am more concerned about what may be next—the “exit” of a monetary policy, which in the eyes of many has now gone on for too long. As noted above, through quantitative easing, the Federal Reserve has added a significant amount of assets to its balance sheet.

How will it decrease its balance sheet and bring it back to historical levels? On one hand, the idea is that the Federal Reserve can continue to hold the bonds it has bought until maturity. On the other hand, the option is to go out into the open market and sell the bonds it has accumulated.

While these options sound feasible, I see them as troubling. If the Fed sells the bonds it has in the open market, then the prices of bonds will collapse due to an increased supply. A simple rule of economics: when the supply increases, prices go lower. In addition, it could cause borrowing costs or interest rates to rise significantly if there are no takers for the bonds. On the other hand, if the Federal Reserve holds its bond purchases until maturity, such action may be taken as an indication that there are no buyers for the bonds, thus, the Fed is forced to hold onto them—this creates investor uncertainty, which is bad for any market.
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Investing Strategies
Gundlach on Why Quantitative Easing Will End Badly
By Chris Ciaccia 03/06/13 - 09:43 AM EST

NEW YORK (TheStreet) — Jeff Gundlach, CEO and chief investment officer of Doubleline Capital, spoke about quantitative easing and said he doesn’t know when it will end. But when it does, he said, it won’t be pretty.

Gundlach, who manages DoubleLine Total Return Bond (DBLTX_), said the four major central banks around the world — the Bank of Japan, Federal Reserve, Bank of England and the European Central Bank — are all firmly in easing mode, expanding their balance sheets at an average rate of 3.5% per year. Many have talked about when the central banks, particularly the Fed, will end quantitative easing, or QE. But this is the wrong question. The Fed will continue to expand its balance sheet not for months, but for years.

“It’s not slowing down anytime soon,” Gundlach said during a presentation.
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March 14, 2013, 7:05 p.m. EDT
J.P. Morgan in government cross hairs
Senate London whale report, Fed stress test shine harsh light on nation’s largest bank
By Sital S. Patel

NEW YORK (MarketWatch) — J.P. Morgan, the nation’s largest bank by assets, suffered a double blow on Thursday after it was charged by a Senate committee with misleading regulators and investors over massive credit derivatives losses and saw its plans to return capital to shareholders questioned by the government.
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Even as a mere child, I lived under the warm impression that we lived in a society subject to a rule of law, and that our financial services industry was part of the civilized, law-abiding part of society.

Now that I am older and more cynical, I take the impression that illegal activity is the norm in the financial services industry, with propaganda used to cover it up with the facade of legitimacy.

Is our society gradually disintegrating, or was I simply naive when I was young, lacking perspective on what now seems shockingly obvious?

Why would it be in Congress’s interest to end ‘too-big-to-jail’?

There is no native criminal class except Congress.
– Mark Twain

Congress must end ‘too big to jail’
By Stefanie Ostfeld, campaigner, Global Witness - 03/07/13 09:00 AM ET

Today, a Senate Banking Committee hearing will examine the extent, causes, and consequences of banks’ failure to adhere to anti-money laundering laws, and the laxity of regulators who are meant to keep the banks in line.

The hearing – entitled “Patterns of Abuse: Assessing Bank Secrecy Act Compliance and Enforcement” – follows a string of banking scandals that have raised serious questions about financial institutions’ compliance with anti-money laundering rules. Illicit flows of money through the financial system have been linked to corruption, international drug trafficking organizations, terrorist groups and sanctioned nations.

One recent example is HSBC, which was fined a record $1.9 billion in December by the U.S. authorities for doing business with Mexican drug lords, terrorists and pariah states, including Cuba, Iran, Sudan and Burma.

And yet, even though HSBC admitted failing to apply legally required money-laundering controls to $200 trillion in wire transfers, there have been no criminal prosecutions.

These are not victimless crimes, but have a very serious human cost. Forty seven thousand people died in drug related violence while HSBC was laundering drug money. 

Questions are rightly being asked as to the degree to which the Treasury Department influenced the decision not to prosecute HSBC. Rumors are circulating that the DOJ even had indictments ready to go but that Treasury insisted that they be held back.

The worrying signals sent by the HSBC affair are that profit trumps the law and banks and bankers will continue to get away with wrongdoing – regardless of any change in rhetoric. For the banks, the potential rewards far exceed the possible fines, and are not offset by the apparently minimal risk of prosecution. So why should they change their behavior?
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Sen. Warren: Drug dealers go to jail; bankers for drug cartel pay a fine
March 7, 2013, 2:45 PM

Sen. Elizabeth Warren waded back into the too-big-to-jail debate in a Senate Banking Committee hearing Thursday.

If you are caught with an ounce of cocaine, there is a good chance you will go to jail, she noted. However, if you are a bank that “laundered nearly a billion dollars for drug cartels and violated international sanctions, your company pays a fine,” Warren pointed out. Read about Holder admitting big banks are too big to jail.
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Accelerating price appreciation on ever-thinning volume…haven’t we seen this movie before?

March 14, 2013, 5:47 p.m. EDT
As stocks extend gains, volume gets even thinner
Trading volume drops below averages for month, year
By Wallace Witkowski, MarketWatch

SAN FRANCISCO (MarketWatch) — As the Dow Jones Industrial Average logged its 10th day of gains and the S&P 500 Index neared a closing high Thursday, one thing has been missing from the rally: volume.

That’s a telling difference from when the Dow industrials DJIA +0.58% last had a run of ten consecutive sessions of gains in November 1996.

On Thursday, the Dow industrials finished up 83.86 points, or 0.6%, at 14,539.14, for a new closing record, its eighth in a row. Read more on Thursday’s stocks.

Also, the S&P 500 Index SPX +0.56% advanced 8.71 points, or 0.6%, at 1,563.23, just 1.92 points shy of its all-time high close set in October 2007. Read S&P 500 all-time high stocks most since 2004.

But like much of March, Thursday trading volumes were below average. Daily volume for stocks on the NYSE Euronext’s NYX +1.05% New York Stock Exchange topped 3.4 billion shares, and stocks listed on the Nasdaq OMX Group’s NDAQ +1.49% Nasdaq Stock Market topped 1.6 billion shares.

Daily trading volume for NYSE-listed shares has steadily declined from its 3.76 billion shares traded on March 1, according to WSJ/Dow Jones data.

The average daily volume over the 10 days ended Thursday, the period of the Dow streak, was 3.47 billion shares, below the average of 3.5 billion for the past 50 days. Also, the March average is about 12% off last year’s.

Similarly for Nasdaq-listed shares, daily composite volume has fallen from 1.85 billion shares on March 1, for an daily average of 1.7 billion shares over that period. That’s below an average of 1.8 billion shares for the past 50 days, and about 10% below last year’s March average.

The last time there was a Dow industrials rally like the current one was in November 1996. Back then, volume was a lot lower than today, but in contrast to this recent streak, volume in the mid-1990s streak rose as the run lengthened.
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Oh what a tangled web we weave
When at first we practice to deceive.

How is keeping banksters who commit crimes against society out of prison in society’s interest?

How Modern Finance Promises to Break the Cycle of Recidivism
By Paul Solman

A new type of financial investment being pioneered in the United Kingdom may be the key for breaking the cycle of recidivism — and it could be coming soon to a prison near you.
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Who’d be crazy enough to buy bonds at this point? (Raises hand…)

P.P.S. The analysis below is wrong, as it doesn’t consider the potential for deflation to increase real returns on bonds to a level above nominal returns. For instance, even if nominal returns on bonds went all the way down to zero, deflation could generate positive real returns. So the “mathematical truth” mentioned below is actually a “mathematical error.”

March 12, 2013, 5:30 a.m. EDT
The shocking truth about bond forecasting
By Todd Tresidder

Forget all the bond market forecasts you see today. They will only distract you from focusing on what is essential to making a smart investment decision — risk versus reward analysis.

The reality is nobody knows if the final top for the bond market is now or three years from now. It is a fool’s errand to play forecasting games because the future can’t be reliably predicted. Asset allocation decisions based on forecasts have no known mathematical expectation: They are a gamble instead of an investment.

Smart investment decisions should only be made based on what is known — not projected. In the bond market, we know the risk to reward ratio makes no investment sense over a long-term time horizon (10-30 years) and that’s more than enough to make a smart investment decision. Here are the facts:

* Interest rates peaked in September 1981 and have been falling ever since to reach extreme lows today.

* 2013 provides the most difficult environment for generating income in 140 years according to O’Shaughnessy Asset Management. Since 1871 there has never been a lower yield period in history — not even close.

* The historical yield on a 60% equity/40% bond portfolio has averaged 4.36% and is now at an all-time low of just 2.0%.

* Since 1790 the U.S. has never been able to borrow long-term capital (30-year bond rates) more cheaply than it can right now.

* According to Timely Portfolios, if the 10-Year U.S. Treasuries (constant maturity similar to IEF) went to their theoretical minimum - zero - the total remaining upside is a paltry 17% gain. In other words, if interest rates went as far as they could theoretically go on the downside the entire upside left on 10-Year Treasuries is a mere 17%.

* With that said, your actual returns would depend on how long it took to reach the theoretical limit. For example, Market Sci blog showed that if it took 4 years to reach zero then the annualized return would be just 5% and the total return would be 21.6%.

* If you assume a more realistic downside limit like Japan’s record low yield for their 10-Year Note at 0.47% then the maximum remaining upside is reduced to a mere 13.8%. If it takes four years to get there your annual return is just 4.1% with a total return of 17.6 — before inflation! If you net out inflation, the real return is minuscule at best.

The implication is clear — the upside potential in bonds is extremely limited. This is not opinion or prediction: it is mathematical truth. However, that is only the first half of the reward to risk analysis investors must make.

Unfortunately, the second half of the analysis - risk - is also unfavorable for bond investors because interest rates are at historic lows. Again, it is simple mathematics that cause this situation because a modest rise in rates from today’s low levels could cause disproportionately large losses potentially dwarfing any income received in the interim.
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