Bits Bucket for June 8, 2013
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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wages fall and jobs disappear in a failing economy, and the weakening dollar brings price inflation. don’t be mystified by higher production and lower wages. falling wage can happen when when the cost of production overwhelms profit margins per unit produced. in other words, more production doesn’t necessarily mean higher profits, not in a weakening economy. cost of production is affected by taxes and regulations as well as cost of labor. I think regulations are hurting profits even more than taxes right now. regulation cost compliance is driving up the cost of production. of course guys like alan pyke will never understand this. more people out of work means that more people are willing to work for less.. which means fewer and fewer will be buying homes..
—
First Quarter Of 2013 Saw Largest Wage Drop Ever
By Alan Pyke on Jun 7, 2013 at 2:00 pm
The first three months of 2013 saw wages fall 3.8 percent – the largest drop in hourly pay in the 65-year history of that statistic – despite an increase in worker productivity. With high unemployment freeing employers from fears that their employees will turn elsewhere, the U.S. recovery has been marked by a decoupling of rising productivity from stagnant wages.
http://thinkprogress.org/economy/2013/06/07/2121581/first-quarter-of-2013-saw-largest-wage-drop-ever/?mobile=nc
the weakening dollar brings price inflation.
What weakening dollar?
The dollar index is at about 82. This is right at the 10 year average and higher than the dollar was 5 years ago. So what “weakening dollar”?
http://www.marketwatch.com/investing/index/dxy/charts?symb=DXY&countrycode=US&time=13&startdate=1%2F4%2F1999&enddate=6%2F8%2F2013&freq=3&compidx=none&compind=none&comptemptext=Enter+Symbol%28s%29&comp=none&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=2&style=1013
What weakening dollar?
i didn’t say “weakening dollar against other weakening currencies”..
ours just isn’t weakening as fast as others.
“First Quarter Of 2013 Saw Largest Wage Drop Ever”
That’s crazy. The economic recovery continues by leaps and bounds, as evidenced by ever-rising housing and stock prices.
How can wages possibly be falling? Reading that is as shocking as hearing a loud fart in church.
This is an absolutely delicious development for greedy pigs. Bigger yachts paid for by struggling serfs. Delectable.
falling wage can happen when when the cost of production overwhelms profit margins…..I think regulations are hurting profits even more than taxes right now.
What economy and country are you talking about?
Corporate profits hit record as wages get squeezed
http://money.cnn.com/2012/12/03/news/economy/record-corporate-profits/index.html
NEW YORK (CNNMoney)
Just four years after the worst shock to the economy since the Great Depression, U.S. corporate profits are stronger than ever.
In the third quarter, corporate earnings were $1.75 trillion, up 18.6% from a year ago, according to last week’si gross domestic product report. That took after-tax profits to their greatest percentage of GDP in history.
But the record profits come at the same time that workers’ wages have fallen to their lowest-ever share of GDP.
Corporate profits hit record as wages get squeezed
not when the true rate of inflation is taken into account.
Corporate money may not be in USD.
In gold?
Irish pounds is the currency of choice for Apple.
If you use inflation to make corporate profits seems smaller than they are, then the same inflation will also make worker wages even smaller than they are. You can’t have it both ways.
If you use inflation to make corporate profits seems smaller than they are, then the same inflation will also make worker wages even smaller than they are.
yes. there’s nothing inconsistent with my position.
You can’t have it both ways.
you don’t understand the problem.
Corporate profits hit record as wages get squeezed
not when the true rate of inflation is taken into account.
Profit margins are most importantly figured in percentages of income. Wages are dropping. In addition, the “true rate of inflation” affects the cost of doing business (business expenses) as well as the profit. Therefore “record profits” are, in fact, record profits.
The fact is the headline:
“Corporate profits hit record as wages get squeezed”
Profit margins are most importantly figured in percentages of income.
false.
Wages are dropping.
i posted the article to show that.
In addition, the “true rate of inflation” affects the cost of doing business (business expenses) as well as the profit.
evidently you didn’t read or you didn’t understand what i wrote in response to the article.
Therefore “record profits” are, in fact, record profits.
not when the true rate of inflation is taken into account.
“Corporate profits hit record as wages get squeezed”
that’s an interpretation of a fact, by an economic illiterate. i’m not going to keep repeating myself. if you have a new argument, make it.
“not when the true rate of inflation is taken into account.”
Are you saying that with that taken into account, corporations are losing money, or that the rise isn’t quite 18.6%. If it knocks the corporate profit increase down to 10%, that’s still a bloody lot, considering that wages are headed in the other direction.
hello Pete,
Are you saying that with that taken into account, corporations are losing money,
no, i’m just saying that with that taken into account corporate profits aren’t as high.
or that the rise isn’t quite 18.6%.
that’s in nominal dollars. price inflation is higher than the government is telling us it is. they have a vested interest in understating inflation.
If it knocks the corporate profit increase down to 10%, that’s still a bloody lot, considering that wages are headed in the other direction.
that’s true, but in a failing economy the employer has the upper hand. jobs become hard to come by and people are willing to work for less.
My wages dropped nine percent over three years. I basically stayed with the same consulting firm and did not complain because as a shareholder, well over 6,000 shares, I am doing well. Wearing my shareholder hat, I cheer on my own hourly rate cut. I am usually a hard negotiator and can return to that style.
Stop with the sob stories.
“Stop with the sob stories.”
Lighten-up; this is how the other half lives.
regulation cost compliance is driving up the cost of production.
From the article you posted:
“the U.S. recovery has been marked by a decoupling of rising productivity from stagnant wages.”
“Rising productivity”, “Record profits” do not reconcile with your assertion of “regulation cost compliance is driving up the cost of production.”
“Rising productivity”, “Record profits” do not reconcile with your assertion of “regulation cost compliance is driving up the cost of production.”
yes, they do. i’ve already explained it in a prior post.
Great stuff TJ…. Thank you.
However, I’m troubled by the multiple definitions of “inflation”. Typically, prices cannot inflate without wages rising. What I see happening is price fixing or the deliberate imposition of bottlenecks to interfere with a free market.
Your thoughts?
hi HA, how ya doin’?
I’m troubled by the multiple definitions of “inflation”.
well, thanks to peter schiff and most others, the terms get confused. most people think that monetary inflation causes price inflation. but as long as money gets created in a legitimate way, it doesn’t cause price inflation.
here’s one way to see it..
imagine a vat of water at some warm temperature. each molecule of water in the vate represents one unit of fiat currency, or ‘a dollar’. the temperature of the water represents value. most people believe that added currency/water to the vat is cold, like ice cubes, which lowers the temperature/value of the water/currency.
but it doesn’t work that way. currency sitting in reserves in banks doesn’t have value until it’s loaned out at a certain rate of interest. it’s the borrowing of the currency at interest that gives it value. if no one borrows it (you can’t push on a string), it just sits there.
when borrowed money is created, it comes into the economy at the average value/temperature of the unit fiat at that time. in other words, it doesn’t lower the temperature of the vat of water/currency at all. if the fiat unit of value isn’t lowered, there’s no price inflation from the newly created currency.
but price inflation can happen when currency isn’t created in a legitimate way (counterfeiting can even be done by a government), as was done in zimbabwe. price inflation also happens from wage inflation, but price inflation from wage inflation isn’t pernicious. in a strong economy, it’s possible for wages to go up even when prices are going down. a strengthening economy will strengthen its currency.
it’s important to know what type of inflation you’re talking about, but it’s usually easy to determine from the context of the conversation. most of the time people are talking about price inflation. peter schiff is a very good economist, but has trouble with currency. it’s always hard to tell if he’s talking about monetary or price inflation, because to him they are mostly the same thing. he’s wrong about that.
What I see happening is price fixing or the deliberate imposition of bottlenecks to interfere with a free market.
i forgot to add this..
yes, holding interest rates low, QE, mortgate tax breaks and other things the government does to keep home prices high, is an attempt at price fixing. it does as you suggest, create bottlenecks. price fixing is antithetical to free markets. the housing bubble is the result.
Comment by ecofeco
2013-06-07 12:43:20
The true bailout cost:
http://www.forbes.com/sites/traceygreenstein/2011/09/20/the-feds-16-trillion-bailouts-under-reported/
“The audit of the Fed’s emergency lending programs was scarcely reported by mainstream media – albeit the results are undoubtedly newsworthy.”
CBS jettisoned its “Early Show” format for “CBS This Morning” by retaining Erica Hill and adding Charlie Rose and Gayle King and adopting more of a hard-news approach.
charlie rose runs from bilderberg question, he is a confirmed …
http://www.youtube.com/watch?v=4y8XB9pzIHU - 131k -
NY Times Editorin-Chief Jill Abramson Runs From Bilderberg Question
http://www.youtube.com/watch?v=S8gRz0GkVYU - 157k -
Former CBS News president Richard Salant (1961 – 64 and 1966 – 79) explained the major media’s role: “Our job is to give people not what they want, but what we decide they ought to have.”
Canadian writer Ken Adachi (1929 – 1989) added:
“What most Americans believe to be ‘Public Opinion’ is in reality carefully crafted and scripted propaganda designed to elicit a desired behavioral response from the public.”
“What most Americans believe to be ‘Public Opinion’ is in reality carefully crafted and scripted propaganda designed to elicit a desired behavioral response from the public.”
Right on. It could more aptly be called “Pubic Opinion”, because that’s about what it is.
You can never loose money with housing. Buy a house today and become a winner!
The NSA thanks you for your input on housing.
Thanks, just telling you what we heard on CNBC. Cus if they say it on the TeeVee, it must be true.
Get into the casino while you can, they arent making any more land.
there seems to be a sense that home prices and stock prices will never go down thx to the printing press.
All the NSA knows is that he made a comment to the HBB. You can be safely assured the content of his post will be ignored.
By the NSA or by the board?
Stocks and homes will lead you to riches unimaginable.
The NSA thanks you for your input on stocks.
Just bought another 10,000 shares of ZNGA. You’ll all be jealous of my Tom Vu lifestyle.
http://www.marketwatch.com/investing/Stock/ZNGA
If you can’t trust us, we’re gonna have some problems here.
“This is the strongest global economy I’ve seen in my business lifetime” — Treasury Secretary Henry Paulson, July 2007
As true today as it was then. Write a check off your HELOC and buy another 1,000 shares of FB.
And don’t forget to make lots of NSA-monitored FB posts after you buy more shares of their stock!
Y’know, it must really, really suck to be a friend of Obama bin Stalin. You’d think it would be a good thing, but in the middle of this whole brouhaha, he appoints Susan Rice as National Security Advisor, when she still hasn’t recovered from her wounds on the whole Benghazi debacle. I’d be saying thanks, but no thanks for the dubious “honor” of being a human shield.
What are you talking about?
Lie, cheat, spy and steal for obama and you get PROMOTED.
It is hope and change for the brownshirts.
Obama: If you can’t trust us, we’re going to have some problems …
http://www.youtube.com/watch?v=Ibc6QSV5ftw - - Cached - Similar pages
21 hours ago …
But I LOVE being lied to… again and again!
Benghazi debacle ??
Really…A debacle ?? Just shows you how pathetic some of the R’s have become…They are desperate….And they are scared $h!tl$$….Because, they are on the cusp of becoming irrelevant in American politics….
Is anyone else seeing the parallels between the current “scandal” campaign and the current housing “recovery” campaign? (Other than the coincident timing, I mean.)
Interesting observation. You get your media apparatus out there loudly repeating a message, continuously.
“…the current housing “recovery” campaign? (Other than the coincident timing,…”
Since the housing “recovery” campaign has been steadily ongoing since the onset of QE1 in March 2009, it correlates very well with anything that has happened since.
It didn’t begin in earnest until last May or June, just after the NAR held it’s annual nationwide conference. By September the REITs were in full acquisition mode, and the press blurbs increased exponentially. (Check Ben’s posts during the spring/summer run-up. The tenor changed from George and Suzy, wah wah wah, to George and Suzy twenty offers, bla bla bla.)
Benghazi and the opportunistic sheetstorm it released was on September 11.
Well, you know, maybe it wasn’t such a debacle after all, what with Chris Stevens and his cohorts being left to twist in the wind and getting it in much the same manner as what Quaddaffi (to this day I still can’t spell that friggin’ name) got. After all, he was the architect of his own doom, so I guess you’re right. Like Hillary said, what difference does it make?
But, you know, Rice and her talking points about some video causing the slaughter was a bit disingenuous. I mean, just a tad. A teensy bit. And I still can’t help feeling that among some of the cohorts there were some people who didn’t deserve it, but that’s just me.
“Just shows you how pathetic some of the R’s have become…They are desperate….And they are scared $h!tl$$….Because, they are on the cusp of becoming irrelevant in American politics….”
Oh, totally. They’ve completely be-sh*t themselves. They’ve gotta go, and it’s not happening fast enuf for me, I really hate slow demises. But go they will, and once they do, the real fun will start as the Dems get out the long knives and turn on each other. Think of a nest of vipers writhing in a snake pit, that’s what it’ll look like. Benghazi was just a preview. They are only united because of the Rs. That’s what keeps them in place.
The Rs should have just snickered with contempt at Rice and Hillary during the Benghazi hearings, just made a feeble show of asking questions and then rolling their eyes and making sarcastic jokes and that sort of thing. Maybe puncutated the testimony with a fart or belch or something like that. Instead they had to get all stern and strident and hypocrapical.
“Think of a nest of vipers writhing in a snake pit, that’s what it’ll look like.”
Excuse me, I made a mistake here. It actually already looks like that. The real fun begins when they start stinging and strangling each other and throwing each other under the bus, and that’s the preview we got with Benghazi.
Got popcorn? Gonna be a real hoedown hootenanny!
Oh for gawds sake, jose. How many Americans have been killed in Iraq? Afghanistan? On the streets of Boston because they’ve been left to political expedience and clusterfrackery? Did any of them “deserve it” either?
Get a little perspective.
(And this is not to excuse any of it, btw, but then, we can’t have the big bad government monitoring meta-traffic to and from known hostile entities either, can we…?)
Like I said, maybe old Hil was right. Chris Stevens and company. What different does it make? A few more drops of blood into the river. Meh, right?
I take it you support the “Fundamental transformation of the United States of America”? Over the last 50 years we have thrown out every manor of honor, pride and responsibility in our government agencies and replaced it with banana republic style corruption…A virtual revolution from within.
Keep importing poverty, bring them in by the millions and put them on public assistance (have them blow us up occasionally as a bonus).
Continue recruiting political robots to our government offices.
Put the anxious on SSRI’s to keep them quiet or make them into human time bombs. (This one works well for the gun grabbers)
Use billionaire funded propaganda campaigns to convince Americans to register their arms, to not smoke and to only eat approved foods”.
Create generations of animals by keeping the poor locked up in virtual inner city prisons and primarily keep them all voting for more stuff and more “security”.
Create terms like “hate speech” to silence the opposition.
And by all means convince the public to let the good bureaucratic foot soldiers control health care.
Go out and dance in the streets, for your side is marching us closer to one party rule faster than the National Socialists in Germany. What you don’t understand is that you are but a useful idiot for those that seek ultimate power.
——-
This message has been protected by a virtual faraday cage and therefore can not be intercepted.
“Really…A debacle ?? Just shows you how pathetic some of the R’s have become”
Is that poor dude who made the youtube video nobody saw still in jail?
He’s in prison for real estate and bank fraud, NE. Not the 12 minute video that sheeple rioted over.
For a few days even gun grabbing Demos who hate oroductive people became libertarians. But…for a few days.
“Oroductive”? Is that like “voluntaryist”?
oh come on. I stopped criticizing spelling MISTAKES since iPads and smartphone predictive text came out. Such nags are so annoying. You know exactly what I meant. Key concept “context.”
“oh” should have been capitalized. Ipad does that automatically, so you had to put some effort into screwing that up.
Oh, relax, Bila. I was just funning with chew.
You’ll note a spelling “mistake” in my post to you as well….
AmazingRuss, get real please. On that post I used my laptop and on this post as well. I do not always use my Droid or iPad. I’m out at businesses, I usually have my droid and occasionally iPad. I take my iPad to the office as well.
Please people, stop being so anal.
GRRR!
Nagger please!
“Please people, stop being so anal.”
Said the constipated old necon.
Neocon? HaHaHaHaHa!
Picture an atheist who is against marriage being a neo con! That is laughable!
If I’m a neo con what are you?
‘is that like “voluntaryist?”‘
Find out for yourself. Ever hear of google? it has a search engine.. Do you know what “search engine” means?
Well, in the world of logic there is inductive reasoning and deductive reasoning. I thought oroductive might some sort of logic having to do with Bill’s love of gold.
Okay, I just looked it up and the closest I can come it “forming mountains out of molehills”.
Remove the obama colored shade.
Bill In LA for President, 2016
Housing bubble full of air in so-cal. It appears we are back to 04-05 era in terms of pricing and mania. (I have no stats to support this, only observations) The few FBs that are left from 07+ are holding on to “make back equity”. A few younger coworkers have parents helping them with downpayments on houses because “its a great time to buy”. Our neigbor who can barely pay the bills is looking at buying a house with 0% down. They are building a new MB dealership in Temecula for people to spend HELOCs on.
Perhaps we are on the road to recovery, I just dont see the creation of jobs or a real economy to support it. At least locally.
If housing were recovering, you’d see prices much lower and sales much higher. This isn’t what is happening in CA.
When housing is finally allowed to recover in CA, look out below as prices are currently 400% higher than trend.
“finally allowed to recover”
What makes you think that they’re going to let it recover? IMO they’re (Big Brother) too busy covering their buddies behinds in the banks.
‘Perhaps we are on the road to recovery, I just dont see the creation of jobs or a real economy to support it. At least locally.’
Man on the street report from a friend who lives in the Inland Empire does not support job creation strength. He can not find any jobs for his line of work that pay decent. He works in a very economically relevant field. This is California we are talking about. I don’t think he is obsolete. If anything, he is in his prime. I tell him I am shocked that the pay offered is low-balled so low for him. And he is definitely looking as his wife has kept a meter running on his out-of-workhood progress.
“And he is definitely looking as his wife has kept a meter running on his out-of-workhood progress.”
+1 Sounds like the non-breadwinner isn’t getting any.
My SIL put a similar re-employment incentive into effect a few years back when her now-ex-husband was out of work.
He got a job, but they were subsequently divorced within five years.
‘+1 Sounds like the non-breadwinner isn’t getting any.’
No, he does house improvement projects to bide his time, but he feels some mild eyes watching him behind his head. His wife is great. He has been in and out of jobs a bit over the ten years I’ve known him. Mostly due to BS from management. He’s an alpha male in many ways. That does not sit well with some bosses.
“He is an alpha male in many ways. That does not sit well with some bosses.”
Bingo!
“He has been in and out of jobs a bit over the ten years I’ve known him. Mostly due to BS from management.”
Lol. And this information about management came from whom? From someone who is an alpha male?
I love this blog.
‘And this information about management came from whom?’
I have my moments with him where I am infuriated by his alpha attitude. He has worked for more family-owned/private owned companies and finds it frustrating to deal with the politics. Still, he is skilled and worth hiring but the pickin’s are minimal. Anyway, man on the street info from him in the IE. Oh, his wife and him are outta there if she can get a transfer to the PNW.
“(I have no stats to support this, only observations)”
Really?
[Real Estate] Southland Median Price Nears 5 Year High But Not in Los Feliz or the Hollywood Hills
By Allison C. Ferraro
Southern California homes sold at the fastest pace for an April in seven years amid the release of pent-up demand for move-up homes and high levels of investor purchases, according to DataQuick, a San Diego based real estate reporting firm.
The median sale price rose to a 58-month high, reflecting both home price appreciation as well as the simultaneous plunge in foreclosure resales and a surge in mid-to-up-market buying, DataQuick reported.
According to DataQuick, a total of 21,415 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 4.1% from 20,581 sales in March, and up 9.5% from 19,562 sales in April 2012.
Last month’s sales were the highest for the month of April since 27,114 Southland homes sold in April 2006, but they were 11.8% below the overall April average of 24,291 sales. The low for April sales was 15,303 in 1995, while the high was 37,905 in April 2004.
…
The median price paid for all new and resale houses and condos sold in the six-county Southland was $357,000 last month, up 3.3% from $345,500 in March and up 23.1% from $290,000 in April 2012. Last month’s median was the highest since June 2008, when the median was $360,000.
The median has risen on a year-over-year basis for 13 consecutive months, and those gains have been double-digit—between 10.8% and 23.5 %—since last August. Still, last month’s median remained 29.3% below the peak $505,000 median in spring and summer 2007.
Sales rose 35.4% year-over-year in the $300,000 to $800,000 price range – a range that would include many move-up buyers. The number sold for $500,000 or more shot up 52.7% from one year earlier and was at the highest level in just over 5-1/2 years. Sales of $800,000-plus homes increased 51.4% year-over-year.
In April, 29.9% of all Southland home sales were $500,000-plus—the highest for any month since April 2008, when 31.1% of sales reached or crossed the $500,000 threshold. Last month’s $500,000-plus level was up from 27.9% of sales in March and 21.0 % a year earlier.
…
It is far cheaper to rent an ocean view home or apartment here than buy. This will continue to be for decades.
You are predicting low inflation for the next decades?
High inflation of ocean level?
I am predicting low expense stock index funds of the broad market (domestic and international) will have an ARR well above real estate in general and above real estate of ocean/gulf view properties in the U.S. for generations to come.
Whether inflation or deflation.
So it is better to rent cheap and small square footage while throwing money into stock index funds. I just got into a REIT, which pays dividends, but mostly commercial and apartments. Even with that, I expect it to underperform VTCLX and DODFX.
While driving around the south Bay I notice more upscale cars parked at apartment buildings, while mostly modest priced cars in SFH neighborhoods. The hapless Home moaners (HHMs) cannot afford a luxury car because of their interest, property taxes, and maintenance costs on the moldy stucco boxes.
So low inflation and a bull market for the next 20 years?
Do you really want to consider peoples’ cars as being indicative of their wealth? There are some perspectives in which saving money for other uses while driving a beater is considered a rather responsible part of living within one’s means.
Do you really want to consider peoples’ cars as being indicative of their wealth?
Absolutely no! I am just saying these people don’t see the merit in buying real estate where they get the daily/hourly ocean breezes so they are probably thinking they might as well spend their money on image rather than on where they lie down at night under a ceiling.
For me my preference was to buy stock mutual funds. Thus I own a 2003 Japanese economy car. Runs well still. It has a bland color but no scratches and still looks good. I chose bland so that it would be less likely for someone to steal.
There is so much pretense here that in a traffic argument between an expensive Hummer driver and me he called me White Trash (he’s white), probably because of my low cost car.
Well this white trash has a comfortable net worth. And this white trash is going to start drawing from the white trash 401k in a white trash state, not California. But that’s some years down the road.
“I am just saying these people don’t see the merit in buying real estate”
Clearly there is no merit at current inflated asking prices of resale housing.
Remember….. There isn’t a nickel difference in cost between building on the coast and building in Kansas. And we (constructors) are earning profit at $55 per square foot.
No, but there is a cost difference for permitting. California has taken NIMBYism to new heights.
Don’t waste your breath. HA knows where to find a build-able lot in Malibu for $5000. And he can build a house on it that will pass code and HOA’s for $55/sq ft — AND make a profit!
There is a difference in the cost of the lot. NOTHING else.
Smarten up.
Definition of THREAT
1: an expression of intention to inflict evil, injury, or damage
2: one that threatens
3: an indication of something impending
Examples of THREAT
He was willing to use violence and threats to get what he wanted.
She ignored their threats and continued to do what she felt was right.
a country under threat of civil war
Obama: If you can’t trust us, we’re going to have some problems …
http://www.youtube.com/watch?v=Ibc6QSV5ftw - - Cached - Similar pages
19 hours ago … Obama: If you can’t trust us, we’re going to have some problems. …
The PRC has a revolving back door into our federal systems. We will have to trust them too.
Perhaps Google should expend less effort spying on American citizens, and more on addressing its own cybersecurity concerns.
Secret Intelligence Fuels U.S. Hacking Fight With China
By Michael Riley - Jun 6, 2013 6:46 PM PT
When Barack Obama meets with President Xi Jinping at a California estate known as Sunnylands today, China’s hacking will be high on the agenda, pushed there by a drumbeat of bad news linking that country’s military to attacks on U.S. companies and defense contractors.
The seeds of the dispute, though, are at least three years old. That’s when a set of key intelligence breakthroughs and devastating attacks, including a breach of Google Inc. (GOOG)’s computers, reshaped the White House view of China’s cyber spying.
Although public information about the breach at Google and almost three dozen other companies was sketchy, that wasn’t the case for the U.S. government, according to a person familiar with the investigation.
Within 24 hours of Google’s January 12, 2010, announcement, U.S. investigators knew the attack had been state sponsored. Within three weeks, they had pinned it on a specific unit of the People’s Liberation Army, the person said. The attacks on Google and the other companies were especially worrisome because they targeted technology that makes up the underpinnings of the Internet.
The attack on Google, dubbed Operation Aurora by McAfee Inc. (MFE) researchers, came about the same time that U.S. investigators were making a separate breakthrough. After years of trying, they identified several key individuals in the attacks against U.S. companies, placing them at the heart of China’s intelligence apparatus.
…
Backdoor for China to Google’s computers == BAD
Backdoor for NSA to Google’s computers == only way we can defeat the TERRORISTS
This coment made me laugh.
Obama: If you can’t trust us, we’re going to have some problems
“Well I guess we are going to have problems.”
Now we’ve pissed off the Panda and we’re going to have some problems here.
NSA Scandal Looms Over Obama-Xi Talks
June 08, 2013 5:25 AM
President Obama walks with Chinese President Xi Jinping at the Annenberg Retreat at Sunnylands as they meet for talks Friday in Rancho Mirage, California.
President Obama always intended to talk about spying this weekend. But not like this.
He’s at a sprawling estate in the Southern California desert this weekend, getting to know China’s new leader, but domestic controversies have followed him there.
The president veered off his talking points Friday to spend more than ten minutes defending a pair of massive surveillance operations that the media recently disclosed.
One program gives the National Security Agency months of phone logs from Verizon. The other gives the government access to even more detailed information like photos and chat logs from internet giants including Google, Yahoo and Microsoft.
About that second program, Obama told members of the press, “This does not apply to U.S. citizens, and it does not apply to people living in the United States.”
…
No biggie, China pretty much thinks Obama bin Stalin is a stooge and an idiot anyway. They’ve dissed him at past G-whatever international conferences, excluded him from meetings, etc. Bascially they hold him in contempt. Not that it matters, bin Stalin is pretty much oblivious to it.
Don’t think Michelle doesn’t know the score, though. Her absence is her way of saying “Back Atchoo”. She’s no fool. I dunno why, but sometimes I just can’t help but admire her.
Watching Republicans support Obama in the NSA spying scandal feels strange.
Why? Why is that any stranger than watching the Dems support Bush on Iraq? I’ll never forget the voice vote on the Iraq “war”. There was Florida’s contemptible go-along get-along “humanitarian” Senator Bill Nelson: “Aye!” Hope his false teeth didn’t drop out.
They passed the law hoping to get the moosleems. Obama just expanded it against white people.
In one sentence Obama is a lying Muslim from Nigeria, the next a patriotic American soldier in the fight against terrorism.
Very strange indeed.
Can exposing official lies actually cause past export growth to plummet? There is something terribly wrong with journalistic logic these days.
China Export Growth Plummets Amid Fake-Shipment Crackdown
By Bloomberg News - Jun 8, 2013 12:31 AM PT
China’s export growth plummeted to a 10-month low in May and imports unexpectedly fell as a crackdown on fake trade shipments exposed weakness in global demand.
Overseas sales rose 1 percent from a year earlier, the General Administration of Customs said in Beijing today, trailing 35 of 38 analyst estimates in a Bloomberg News survey and down from April’s 14.7 percent pace. Imports dropped 0.3 percent, leaving a trade surplus of $20.4 billion.
…
I am firmly convinced that the “China Trade” is one big fraud, and much of it has probably been from the beginning. Their stuff sucks, anyway. Useless crap, a lot of it. Planned obsolescence on steroids.
“Their stuff sucks, anyway. Useless crap, a lot of it.”
At best.
At worst, it’s poisonous. Not to suggest that the billionaire oligarchs who profit handsomely from international trade would give a flying fork about it.
Trader Joe’s, others being sued by State of California for what the state says is lead laced candy
Trader Joe’s still has item on shelves
Posted: 06/05/2013
Last Updated: 3 days ago
Cris Ornelas
BAKERSFIELD, Calif. - The California Attorney General is suing Trader Joe’s and others, saying they sold Ginger and Plum Candy with dangerously high levels of lead.
Officials with Trader Joe’s said they can’t comment on pending litigation but they said the items have not been pulled form the shelves.
“There’s a lot of things in food and so I am not too surprised,” said one customer.
Target is also named in the suit, but said they have pulled the items from their shelves. Customers 23ABC spoke to at Trader Joe’s said they were caught off guard by the news.
“It’s surprising because I do trust Trader Joe’s to provide a good quality product that’s safe,” said (SIC)
23ABC’s Cris Ornelas went to the Trader Joe’s here in Bakersfield and bought two different bags of candied ginger. It’s important to note that the back of these bags said they came from Thailand and the state said the problem ginger came from China.
Many customers were struck by the irony of a health food store selling something the state said could poison them.
“Primarily 90 percent of our shopping is done here and a lot of it has been that way for years for me,” said one shopper.
“I know lead is bad for your health and I certainly don’t want to knowingly consume a product that has too much lead in it,” another customer said.
…
Thanks for the one up on this ginger and plum
alert. I love TJ’s Ginger Chews!
“I love TJ’s Ginger Chews!”
I’m a regular, but I plan to read the TJ’s product labels much more closely going forward. If it looks like it might have come from China (including the raw ingredients), I won’t buy it.
Where did anyone get the idea that Trader Joe’s is a health food store?
Lead is good for your teeth.
Ruth: Will the FEMA camps be seated according to class? I hope they’re not too crowded.
Rose: Oh mother, shut up! Don’t you understand? There aren’t enough FEMA camps. Not enough by half.
My BIL in and his wife are moving to Rome, GA in a few weeks.
Escape From Florida!
Why not move to some high tax union goon city?
Like Chicago, Detroit, Newark, Camden, Buffalo or Cleveland?
When in Rome, act like Romans.
When in Rome, act like Barbarians.
Non-Roman warriors
Hope and change y’all!
But it is all Bush’s fault anyways.
Liberals marching in goosestep towards their social utopia.
—————
DHS insider: It’s about to get very ugly
http://canadafreepress.com/ | june 8, 2013 | Doug Hagmann
“If anyone thinks that what’s going on right now with all of this surveillance of American citizens is to fight some sort of foreign enemy, they’re delusional. If people think that this ‘scandal’ can’t get any worse, it will, hour by hour, day by day. This has the ability to bring down our national leadership, the administration and other senior elected officials working in collusion with this administration, both Republican and Democrats. People within the NSA, the Department of Justice, and others, they know who they are, need to come forth with the documentation of ‘policy and practice’ in their possession, disclose what they know, fight what’s going on, and just do their job. I have never seen anything like this, ever. The present administration is going after leakers, media sources, anyone and everyone who is even suspected of ‘betrayal.’ That’s what they call it, ‘betrayal.’ Can you believe the size of their cahones? This administration considers anyone telling the truth about Benghazi, the IRS, hell, you name the issue, ‘betrayal,’” he said.
“We know all this already,” I stated. He looked at me, giving me a look like I’ve never seen, and actually pushed his finger into my chest. “You don’t know jack,” he said, “this is bigger than you can imagine, bigger than anyone can imagine. This administration is collecting names of sources, whistle blowers and their families, names of media sources and everybody they talk to and have talked to, and they already have a huge list. If you’re not working for MSNBC or CNN, you’re probably on that list. If you are a website owner with a brisk readership and a conservative bent, you’re on that list. It’s a political dissident list, not an enemy threat list,” he stated.
I’m. Soooo. Scaaaaared….
Next time wave to the drones when they fly over your place. They are “there to help you.”
I’ve been flying drones since I was fifteen. They’re a hoot.
How many moosleems have you killed?
Once the divorce attorneys get ahold of this info it will be fun for all!
China is tanking.
Even their fraud is tanking.
————-
Chinese Trade Numbers Come In Massively Below Forecasts
Business Insider | 6-8-203 | Fran Wang, Agence France Presse
China on Saturday reported a sharp slowdown in exports in May compared to the previous month while imports unexpectedly dropped, as the world’s second largest economy grapples with slowing growth and sluggish overseas demand.
Overseas shipments rose just one percent to $182.8 billion last month, far lower than 14.7 percent recorded in April, customs authorities said in a statement.
It also missed a medium forecast of 5.6 percent expansion in a Dow Jones Newswires’ poll of economists.
Imports dropped 0.3 percent to $162.3 billion, said the statement, down from a rise of 16.8 percent in April and well below the economists’ median forecast of a five percent increase.
The disappointing performance was due to “a slowdown in the domestic economy, sluggish foreign demand, companies’ high costs, the appreciation in the yuan’s real value and a worsening trade environment”, customs said.
It was also a result of a crackdown on misreporting by importers and exporters, it added. They may have overstated their business to seek to evade Chinese government controls on capital movements and channel funds into the country, he said.
“Even their fraud is tanking.”
If anyone has statistics on the massive investing losses incurred by the suckers who fell for this scam, please post.
If the recent uptrend in mortgage rates continues at its current pace for a few more weeks, the potential for private sources of loanable funds to return to mortgage lending will have been successfully restored.
Bloomberg News
Home Loan Rates Near 4% Send Buyers Scurrying
By Kathleen M. Howley and Prashant Gopal
June 06, 2013
Rob Braunstein said his search for a three-bedroom home on a quiet street in Needham, Massachusetts, is taking on more urgency as he watches mortgage rates tick higher. Every increase, he worries, shrinks his budget by boosting monthly payments, he said.
The average rate for a 30-year fixed mortgage has risen for each of the past five weeks and is at the highest level in more than a year, according to government mortgage-buyer Freddie Mac. While that’s already put a dent in the refinancing boom that has powered bank earnings this year, for buyers like Braunstein, the message is clear: buy quickly.
“Refinancing depends only on mortgage rates and therefore is very sensitive to changes in rates,” said Jed Kolko, chief economist at San Francisco-based Trulia Inc., an online property listing service. When it comes to buying, “some people might want to hurry up and make a purchase, but with inventory so tight they might not be able to move that fast.”
Rates for a 30-year home loan rose to 3.91 percent in the week ended today, from 3.81 percent, McLean, Virginia-based Freddie Mac said in a statement. That’s up from 3.35 percent at the start of May as the Federal Reserve signaled to bond investors it may scale back the stimulus that had driven borrowing costs to record lows, amid signs of continuing improvement in housing and the U.S. economy. The 15-year rate has increased to 3.03 percent from 2.56 percent at the start of last month.
Bankrate Inc., an interest-rate aggregator, said today that the benchmark 30-year fixed mortgage rate has climbed to 4.1 percent, according to its weekly national survey.
‘Reasonable Certainty’
“Have we seen the rock bottom for interest rates go past?” said Keith Gumbinger, vice president of HSH.com, a Riverdale, New Jersey-based mortgage information website. “That’s a pretty reasonable certainty. We are off the record lows. To get back to those record lows, we’d need to see a considerable slowdown in the economy.”
…
Amazing what can happen when you get government OUT of the way.
The free sh*t army will NOT be happy.
—————
A Rare Glimpse at How a Free Market Could Work
Townhall.com | June 8, 2013 | Daniel J. Mitchell
I’ve complained ad nauseam about how government has screwed up the health sector, both because of spending programs such as Medicare and Medicaid and because of tax and regulatory distortions that have mutated the supposedly private insurance market into some bizarre form of pre-paid, all-you-can-eat healthcare.
Now we have a free market revolution by a doctor in Maine.
Dr. Michael Ciampi took a step this spring that many of his fellow physicians would describe as radical. The family physician stopped accepting all forms of health insurance. In early 2013, Ciampi sent a letter to his patients informing them that he would no longer accept any kind of health coverage, both private and government-sponsored. Given that he was now asking patients to pay for his services out of pocket, he posted his prices on the practice’s website. …“It’s been almost unanimous that patients have expressed understanding at why I’m doing what I’m doing… the decision to do away with insurance allows Ciampi to practice medicine the way he sees fit, he said. Insurance companies no longer dictate how much he charges. He can offer discounts to patients struggling with their medical bills. He can make house calls. “I’m freed up to do what I think is right for the patients,” Ciampi said. “If I’m providing them a service that they value, they can pay me, and we cut the insurance out as the middleman and cut out a lot of the expense.”
His expenses have come down, and consumers benefit from much lower prices.
Ciampi expects his practice to perform just as well financially, if not better, than before he ditched insurance. The new approach will likely attract new patients…because Ciampi has slashed his prices. “I’ve been able to cut my prices in half because my overhead will be so much less,” he said. Before, Ciampi charged $160 for an office visit with an existing patient facing one or more complicated health problems. Now, he charges $75. Patients with an earache or strep throat can spend $300 at their local hospital emergency room, or promptly get an appointment at his office and pay $50, he said. Ciampi collects payment at the end of the visit, freeing him of the time and costs associated with sending bills, he said. …“If more doctors were able to do this, that would be real health care reform,” he said. “That’s when we’d see the cost of medicine truly go down.”
I have no idea if all medical costs would fall by 50 percent in a market-based system, but even if the system-wide savings were only half that much, that would be an enormous benefit to the economy.
+1 This how doctor’s offices functioned when I was in my youth.
Dr. Ciampi is going to have a hard time admitting his patients to a hospital. If you’re not a part of the network, many won’t allow physicians privileges.
Boutique or “concierge” practices have their charms, but you do realize that fee-for-service medicine was why insurance companies were able to take over the health service industry in the first place, right? The average schmo couldn’t afford them — and the public health suffered as a result.
Immunity to the Sherman Anti-Trust Act is why insurance compa ies have taken over.
regulatory distortions that have mutated the supposedly private insurance market into some bizarre form of pre-paid, all-you-can-eat healthcare.
Many of the hospitals are buying up physicians’ practices and using theses practices to feed patients into their dollar extracting enterprises.
Hospitals want to engorge themselves with the dollars they can extract from the all-you-can-eat healthcare policies that the patients bring to the table.
Dr. Ciampi may not be accepting insurance anymore, but I bet a bunch of his patients are filling out the paperwork and submitting for the expenses themselves. They are just getting reimbursed at out-of-network rates (less co-pays) after figuring out the paperwork themselves, rather than letting the doctor’s office do it. It can work for a doctor, since the doc mark ups are often in the 50% range. Won’t ever work for lab work. Their mark ups are easily 900% for self-pay patients (over what insured patients are charged). Hospitals can be that high as well, though not always.
So, not really a free market experiment. Just one guy deciding to outsource his paperwork to his patients.
If you live in Tornado Alley, DO NOT buy a home now.
Same advice goes for other parts of the U.S.
How about buying a house not made out of 2×4 toothpicks and has a basement?
Why are you against economic stimulus? With the right construction practices, disasters can pull in huge amounts of FEMA money for reconstruction.
I forgot.
The American way of economic activity.
You can thank Vasili Leontiev for that development.
Poorly-constructed McMansions in Tornado Alley offer a fantastic form of Keynesian economic stimulus. After a tornado comes along and destroys huge swaths of shoddily-built tract homes, they have to be rebuilt, creating JOBS, JOBS, JOBS.
By contrast, homes constructed to withstand tornadic winds would offer no commensurate economic benefit.
Insight: In tornado alley, building practices boost damage
Memorial Day fireworks explode over a house damaged by the May 20 afternoon tornado in Moore, Oklahoma May 26, 2013. REUTERS/Lucas Jackson
By Greg McCune
Sat Jun 8, 2013 7:04am EDT
(Reuters) - In a residential neighborhood near the center of a monster tornado that struck Moore, Oklahoma last month, two partially damaged houses stand like an island among others flattened by the storm.
The walls and roofs of the buildings in a new housing development called Featherstone Addition are still upright while there is nothing left but a concrete foundation where other homes once stood nearby.
The two homes were not completely spared but are salvageable, according to David Prevatt, a civil engineer who saw them when he surveyed the damage after Moore took a direct hit from an EF5 tornado, the strongest rating.
He is convinced that the two houses survived because they were built stronger than most in Oklahoma and the rest of “tornado alley” - the region stretching from Texas to Iowa that accounts for roughly a fourth of all U.S. tornadoes.
“This notion that we cannot engineer buildings economically to withstand tornado loads is a fallacy,” said Prevatt, who has studied damage from hurricanes and the devastating tornadoes in 2011 in Joplin, Missouri and Tuscaloosa, Alabama.
The cost of damage from tornadoes is soaring in the United States even though National Weather Service historical data shows no significant rise in the number of storms.
The last five years have seen the highest losses from thunderstorm damage in U.S. history, according to an analysis by insurer Munich RE.
Tornadoes were the costliest natural catastrophes in the U.S. in 2011 - the year of Joplin and Tuscaloosa - with an estimated $47 billion in overall economic damage, and insured losses of $26 billion, Munich RE said.
Tropical storms topped the natural disaster list in 2012 because of Hurricane Sandy. But even in a relatively quiet tornado year, economic losses from severe thunderstorms reached $28 billion in 2012 and insured losses $14 billion, Munich RE said.
The Moore, Oklahoma tornado on May 20, and associated storms, could cost up to $5 billion in insured losses, disaster modeling company Eqecat has estimated, making it the second costliest tornado outbreak on record after Tuscaloosa.
Damage costs are rising because of increased population density, even in mostly rural states such as Oklahoma, which has seen substantial urban sprawl in the last decade, said Greg Carbin, Warning Coordination Meteorologist for the National Weather Service’s Storm Prediction Center in Norman, Oklahoma.
Another important reason that has received less attention, is that most homes in tornado alley are not built to withstand even a modest tornado.
The result is that residents of tornado alley, insurance companies and the U.S. government are footing a mounting bill from damage that could be limited with better construction, according to several engineers, meteorologists and consumer advocates interviewed by Reuters.
“We have to stop this cycle of a storm coming along destroying things and we build them back the same,” said Leslie Chapman-Henderson, chief executive of the Federal Alliance for Safe Homes, a consumer group. “That is the official definition of insanity.”
…
Good and not too expensive ideas.
A few more nails or screws
Some straps between roof and walls
Some bolts between foundation and walls
And stronger garage doors
——————————–
Building a house to limit tornado damage involves making strong connections from the foundation to the walls to the roof, said Prevatt.
Nails hammered into the wood at a 90 degree angle provide little resistance to the upward suction of a tornado, several construction and engineering experts said.
“We saw that in many places in Moore,” said Randy Shackelford, Research Engineer and Code Specialist for Simpson Strong-Tie Company in McKinney, Texas. “Two nails sticking up where the stud (wall frame) once was.”
The next best connection is what is called a “toenail” in construction jargon, which involves driving the nail into the wood at a 45 degree angle. This provides significantly more resistance than nails driven at a 90 degree angle.
The two houses Prevatt saw standing in Moore amid the devastation were built with what are called “hurricane ties” or metal straps to bind the roof to the walls, which are stronger than nails, he said. These are required by the robust Florida building code but not in Oklahoma and most of tornado alley.
Connections between walls and the concrete foundations of homes were another area where Moore construction was poor, Prevatt and Marshall said.
The ideal in a storm region would be to use “anchor bolts” - a steel rod embedded in the concrete foundation and bolted to the wall frame.
In Moore, both engineers said they saw numerous cases of nails binding the walls to foundations rather than bolts.
Tanya Brown, a research engineer for the Institute for Business and Home Safety, which studies tornadoes for insurance companies, said she saw many examples in Moore of the house failing because of a collapsed garage door.
The wind blew prefabricated garage doors in, allowing a rush of air into the house and destroying the structure, she said. The garage doors needed braces to avoid collapse, which are not required in Oklahoma.
“They are not commonly used outside hurricane areas,” she said.
I suspect the main obstacle to better construction practices in Tornado Alley is not the lack of technologically-superior alternatives, but rather the expense coupled with the moral hazard incentive created by government-subsidized insurance which stands in the way. Plus it is hard to tell from looking at a home from the outside whether the nails were driven in at a 90 degree or a 45 degree angle; one needs enforced building codes (i.e. EVIL profit-decreasing government regulation) to address this issue.
But Mr. Market wants you to buy a new house with FEMA money! How’s that gonna happen with intrusive government inspectors demanding that houses be able to withstand local weather?
Mr. Market wants you to buy a new house with FEMA money!
Public-private partnership is definitely the way to prosper!
Mortgage rates spiked in May
By U-T San Diego 6 a.m. June 8, 2013
Today’s column is written by guest columnst Michael Deery of Citywide Financial Corp.
In case you blinked, conventional mortgage rates spiked from 3.25 to 4 percent last month. Why? Due to recent improving economic data, the Federal Reserve is actively discussing when they should start easing off on their monetary stimulus programs, which have been artificially suppressing interest rates over the past several years. The Fed has been pumping an astounding $85 billion into the market every month to kick-start the economy. But now that employment is improving and the housing market is on fire, the time has come where the Fed needs to take the training wheels off and see if the economy can stand on its own.
The influence of Fed stimulus on mortgage rates is undoubted. The average 30-year fixed rate prior to stimulus was roughly 6.5 percent compared to today’s rate of 4 percent.
Changing mortgage rates do more to influence home affordability than changing home prices. Quarter after quarter, home affordability stuck near all-time highs even as home values recovered from having hit bottom. Home affordability didn’t improve because home prices were lower — it improved because mortgage rates were moving lower.
Each time rates ticked lower, a buyer’s purchasing power increased. Lately, however, the trend has reversed. Mortgage rates are now at 4 percent and the answer to “how much home can I afford” has changed.
When rates increase by just 1 percent, a buyer loses 10 percent in purchasing power. Unfortunately, buyers not yet in a contract are going to feel the effects. They’ll see their estimated monthly payment increase all of a sudden.
But it’s important that buyers today understand where current rates are in relation to historical averages. The average 30-year fixed mortgage rate over the past 40 years was roughly 8.7 percent, and 6.5 percent over the past decade!
…
A return to 6.5 percent rates would serve to restore affordability by 33%.
Who cares about interest rates? Just get a no interest loan and don’t worry about the interest payment for 5 years!
Good point. Also make sure to avoid making any downpayment while you are at it.
Though I doubt my wife and I will ever again buy homes, if I am feeling sufficiently flush in a few years, I look forward to helping my kids out with their 100% LTV FHA mortgages.
Give the gift of a down payment
Can you use a financial gift, say from a relative, as part of your mortgage down payment? And what constitutes a ‘gift’ anyway? Read on to learn more.
By Smart Spending Editor May 28, 2013 4:36PM
This post is by Abby Hayes of partner site the Dough Roller.
MSN Partner Saving a down payment is one of the hardest parts of buying your first home. In fact, about 25% of first-time homebuyers get help with a gift from a relative as part of their down payment. There’s nothing wrong with this, but there are some regulations you need to consider as you plan for the big purchase.
Can you use a gift as part of your down payment?
First, you need to know if your lender and type of mortgage will allow you to use a gift as part of your down payment. With many loan programs, a down payment gift isn’t an issue, but with some mortgages, you may need to prove that you’ve provided most or all of the down payment yourself.
Mortgage programs created with first-time homebuyers in mind, like the FHA loan and VA loan, as well as many state and local programs, allow a significant portion of the down payment to come from a gift. For an FHA loan, for instance, all of your down payment can be a gift from a relative.
With a conventional loan, things get trickier. Most conventional loans, depending on the lender, require a 10%-20% down payment. Of that down payment, a lender may require that some portion, often around 5% of the home purchase price, is provided by you and isn’t a gift.
With that said, limits on down payment gifts vary from one lender to the next. If you’re planning to use a gift for some of your down payment, you should talk to your lender about its rules before you proceed.
Why gifts invite scrutiny
Because a mortgage is the largest loan many of us will ever take out, lenders are cautious about writing them. That’s why you have to prove your income, debt-to-income ratio (DTI) and other financial data. It’s also why down payment gifts may invite scrutiny from potential lenders.
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Don’t buy a home until mortgage rates are back up to normal levels again (6.5%+).
My first mortgage was in double digits.
And houses were affordable.
And there no government programs or government guarantees for ANY mortgages (except for VA mortgages which had low caps and even higher interest rates).
Them came the CRA…
Annual Income: $100,000
Mortgage Share of Income: 30%
Monthly Payment: $2,500
Term: 30 years
Interest Rate / Purchase Budget / Cumulative loss (%) / Cumulative loss ($)
3.125% $583,600.20
6.500% $395,527.05 -32.2% ($188,073.15)
You continue to assume that everyone who is buying is using the maximum amount possible for each monthly payment.
The truth is that if people WANT to buy, they find ways to sacrifice (go out to dinner less, etc.) to make the payments.
The really unfortunate truth is that we have the GSEs that are poised to give people a loan that requires ever-increasing proportions of their income to make the payments.
You guys still think housing prices fall when interest ages go up?
In due time.
The first step is a slowing of the rate of transactions.
Yes house prices will taaaaaaaaannnnnnnkkkkk when interest rates go up.
That is why I expect QE through the end of “The One’s” second term.
When interest rates were 20% in 1980, house prices did not go down across the country.
“When interest rates were 20% in 1980, house prices did not go down across the country.”
You mean when inflation was running rampant at double-digit rates?
And perhaps you never learned this in school, but monetary policy effects operate at long and variable lags. In plain English, this means the timing until the after effects of policy implementation (like Paul Volcker’s high interest rates to stamp out inflation over the 1980-82 period) don’t happen immediately, but at some unpredictable point in the future.
For instance, Ben Jones has frequently posted here about the real estate depression that hit the oil patch in the mid-1980s.
Another good (and perhaps more relevant) example would be the bond yield spike of 1994, which is the last time yields spiked up at a similar rate to last month.
CA housing didn’t actually bottom out until 1996-97, a couple of years after the spike in bond yields. (We bought in 1996.)
This time the price correction may take considerably longer to play out, as rates are currently rising off historically low levels.
“That is why I expect QE through the end of “The One’s” second term.”
That’s a reasonable guess, so far as official policy announcements go.
But it seems quite likely the Fed will continue its recent heightened level of discussion regarding the timing of a QE3 exit, in order to gradually deflate the bond bubble rather than to inadvertently flatten it like a pancake when the QE3 exit becomes official.
At least this is what I am seeing so far…
“You guys still think housing prices fall when interest ages go up?”
You still think resale houses are priced fairly in excess of $35-40/square foot?
Here’s a hint for you……. you’re going to be shocked in the coming years.
So is the financial engineering plan for the Fed to eat the massive losses on MBS as interest rates are restored to normal levels?
If that’s not the plan, then why is their balance sheet so larded with MBS?
Mortgage-Bond Yields Approach 14-Month High After Jobs Report
By Jody Shenn - Jun 7, 2013 12:22 PM PT
Yields on Fannie Mae and Freddie Mac mortgage bonds that guide U.S. home-loan rates approached a 14-month high as May employment data failed to allay concern that the Federal Reserve will pare back its unprecedented stimulus.
Fannie Mae’s current-coupon 30-year securities rose 0.06 percentage point to 2.99 percent as of 3 p.m. in New York, according to data compiled by Bloomberg. Yields reached 3 percent on June 4, the highest level since April 2012, climbing from a record-low 1.68 percent in September when the Fed said it would start buying $40 billion of home-loan debt a month to begin its third round of bond purchases.
The Fed has stoked credit markets through buying $85 billion of the bonds and Treasuries monthly to stimulate the economy, a program that policy makers have said would remain in place until evidence emerges of a sustained improvement. While figures released today showed the jobless rate unexpectedly climbed from a four-year low to 7.6 percent, payrolls rose 175,000, more than the median forecast in a Bloomberg survey.
“I don’t think much can be taken away from today’s numbers in terms of tapering being taken off the table,” Matthew Peterson, a money manager in New York at Bank of Tokyo-Mitsubishi Ltd., said in a telephone interview. “We still have the potential for tapering in September and we still have a couple of long summer months of employment reports before we get to that meeting” of Fed policy makers, he said.
“So volatility will continue at least through the summer,” Peterson said.
…
Gross Says Jobs Report Suggests Fed Won’t Taper Bond Buying
By Liz Capo McCormick - Jun 7, 2013 7:15 AM PT
Bill Gross, manager of the world’s biggest bond fund, said the Federal Reserve is unlikely to reduce its asset purchases after the unemployment rate climbed from a four-year low in May.
“I don’t think today’s report says anything about tapering at all with unemployment going higher and metrics in terms of the work week and wages being very dour,” Pacific Investment Management Co.’s founder Gross said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Mike McKee. Fed Chairman Ben S. Bernanke “won’t taper. But I think ultimately in order to get a more normal economy, the Fed has got to move interest rates up to more normal levels.”
Payrolls rose 175,000 last month after a revised 149,000 increase in April that was smaller than first estimated, Labor Department figures showed in Washington. The median forecast in a Bloomberg survey called for a 163,000 gain. The unemployment rate rose to 7.6 percent from 7.5 percent.
Bernanke said during a response to questions following congressional testimony on May 22 that the Fed could consider reducing the $85 billion in monthly Treasury and mortgage debt purchases within “the next few meetings” if officials see signs of sustainable improvement in the labor market.
Economists cut their estimates for how much the Fed will reduce the amount of its monthly asset purchases, a Bloomberg survey shows.
…
Federal Reserve continues shadow bailout of banking industry – $947 billion of overpaid and low demand mortgage backed securities sit on the massive $2.8 trillion Fed balance sheet. The price of this hidden bailout will hit all Americans.
Posted by mybudget360 in bailout, debt, federal reserve, wall street
The Federal Reserve continues a secretive bailout of the banking system by purchasing more and more questionable mortgage backed securities. You would think that $1 trillion would catch the attention of the media but they seemed focus on other trivial items. The Fed balance sheet is still at record levels above $2.8 trillion to be exact, but the more troubling aspect of all of this is the amount of mortgage backed securities they have purchased. They continue to hoard toxic commercial real estate loans and a massive amount of residential mortgage backed securities. How much? The Fed now holds over $947 billion in mortgage backed securities. Keep in mind that prior to this financial crisis the Fed rarely held anything else except quality paper on its balance sheet. Yet this is the cost of the shadow financial bailout.
The shadow bailout of the financial system
…
May 20, 2013, 7:51 a.m. EDT
Fed’s Fisher wants to slow pace of MBS purchases
By Greg Robb
WASHINGTON (MarketWatch) - The Federal Reserve can only slow the pace of its mortgage-backed securities, as a sudden stop would be “too violent” for the market, said Richard Fisher, the president of the Dallas Federal Reserve Bank on Monday. The Fed is buying $85 billion of Treasury and MBS per month. In an interview on CNBC, Fisher said he would have voted to start tapering the purchases at the Fed’s last meeting at the end of April. “I am not saying cut it off. We don’t want to go from wild turkey to cold turkey overnight. That is the nature of the discussion right now,” Fisher said. The housing market doesn’t need Fed support any more, he said. “That market is on its way,” he said.
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Fed’s $5.7 Trillion Gift Imperiled on Yield Rise: Credit Markets
By Sarika Gangar, Mary Childs & Charles Mead - Jun 7, 2013 7:04 AM PT
The most relentless surge in borrowing costs for U.S. corporate debt in four years is threatening to derail this year’s record pace of sales as concern deepens the Federal Reserve will curtail unprecedented stimulus.
Yields are climbing for a sixth week from last month’s record lows and yesterday touched 3.78 percent, the highest level since September, according to the Bank of America Merrill Lynch U.S. Corporate & High Yield index. U.K. oil-and-gas services provider Petrofac Ltd. (PFC) cited market conditions for canceling its issue of investment-grade dollar-denominated notes as sales fell below the 2013 average for a second week.
While the Fed has enabled companies to borrow $5.74 trillion in the bond market since the end of 2008 by suppressing benchmark interest rates at close to zero percent, debt investors are becoming more discriminating as policy makers consider tapering their monthly bond purchases. That may blunt the record pace of sales, which reached $757.3 billion this year, after an unprecedented $1.48 trillion of issuance in 2012, according to data compiled by Bloomberg.
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Poor babies.
You can rationalize all you want.
World’s Richest Sag $14 Billion as Redemptions Roil Cohen
By Peter Newcomb - Jun 7, 2013 2:39 PM PT
The world’s 200 wealthiest people lost $14 billion from their collective net worth this week as American employers took on more workers than forecast in May, helping the world’s largest economy weather the impact of higher taxes and federal spending cuts.
Hedge fund manager Steven Cohen slipped $500 million, according to the Bloomberg Billionaires Index. Cohen’s firm, SAC Capital Advisors LP, received billions of dollars in withdrawal requests this week, according to two people who saw the contents of a June 4 e-mail sent to employees by SAC President Tom Conheeney.
“We don’t like losing capital, but even with the investors that are leaving, we still have a stable capital base and have been performing well this year,” Conheeney said in the e-mail. Even if the firm ended this year with assets close to where it was four years ago, “we will still be a good-sized firm.”
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Ya gotta love it when a hedge fund is managed by a fellow named Con-heeney.
If there were a God in the universe, this guy’s name would be Conweeney.
Can anyone who thinks they understand the Fed’s mandate kindly explain how a policy to encourage wealthy real estate speculators to crowd out young families from the ability to buy a single-family home and start their lives on a solid financial footing fits their mission?
Because I’m missing it.
Luckily for ordinary American families just interested in buying a home as a place to live, investors are starting to shy away from the very steep sticker prices currently found on homes around the U.S.A.
I’m looking forward to seeing how rich these investors’ cash flow makes them in a rising interest rate, low wage growth environment.
Real Estate Investors Plan to Reduce Purchases and Hold Rentals for Five-Plus Years
Fri, 2013-06-07 16:40
Real estate investors are responding to higher prices by buying fewer properties in the next 12 months and holding their rental properties at least five years or longer, according to a national survey of real estate investors conducted by ORC International for MemphisInvest.com and Premier Property Management Group.
Investor purchasing intentions have changed significantly since ORC surveyed investors in August, when only 30 percent said they planned to buy fewer properties in the next 12 months than they did in the previous year. In the latest survey, the percentage of investors who said they plan to cut back on purchases in the coming year has risen to 48 percent. Only 20 percent of investors said they plan to increase purchases compared to 39 percent 10 months ago.
While they may be buying fewer new properties in the year to come, over half of investors who own rental properties plan to hold them for at least five years or more. One-third, 33 percent, of investors plan to keep them for 10 years or more.
“Higher prices are reducing returns on investment and investors are responding by cutting back on their purchasing plans until conditions sort out. Fewer foreclosures, rising property values and competition from hedge funds are making it tough to find good ideals on distress sales,” said Chris Clothier, partner in MemphisInvest.com and Premier Property Management Group. “On the other hand, investors are planning to hold onto their rental properties for at least eight to 10 years and realize the benefits of rising rents and low vacancy rates. Cash flow is much more important than appreciation.”
Real estate investors play a major role in the national housing economy. Investors purchased 24 percent of all existing homes sold in 2012, a decline from 27 percent in 2011, according to the National Association of Realtors (NAR). The drop in purchasing intentions could result in a further decline in investor market share in 2013.
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Only the fools are buying now. Specuvestors have driven prices so high, they’ve priced everyone out.
High real estate prices (and high property taxes based on those prices) “bails out” pension funds, wall street bankers and unions.
Who are the top donors to obama?
Hint - it is not working young families.
Everything you needed to know about government is when TARP was defeated (1st time). Despite calls/letters running at almost 100-1 to against passing TARP, it passed the 2nd time.
The stimulus? - no public support.
QE1/2/3/4 - no public support.
Obamacare - no public support.
The stimulus? - no public support.
QE1/2/3/4 - no public support.
Obamacare - no public support.
Free cheese - public support
Stabeeleetee of the banks - public support
Free health care - public support
massive loans to buy overpriced houses- public support
government programs to bail out people who got massive loans to buy overpriced houses- public support
Because the FED’s “mission” is self-perpetuation and aggrandizement?
Let me restate my question, then.
Does the Fed have the legal right to transfer vast amounts of real estate wealth effects into the hands of speculators, thereby screwing young families out of a decent chance to start off their lives without a massive albatross of debt hanging from their necks?
They have the full force and faith of the police, army, and various other goons to make it happen. What more do they need?
I don’t suppose a legal basis for their actions would hurt.
The Wall Street Journal
19 HRs ago
Life and Style
How America Lost Its Way
It is getting ever harder to do business in the United States, argues Niall Ferguson, and more stimulus won’t help: Our institutions need fixing.
By Niall Ferguson
Not everyone is an entrepreneur. Still, everyone should try—if only once—to start a business. After all, it is small and medium enterprises that are the key to job creation. There is also something uniquely educational about sitting at the desk where the buck stops, in a dreary office you’ve just rented, working day and night with a handful of employees just to break even.
As an academic, I’m just an amateur capitalist. Still, over the past 15 years I’ve started small ventures in both the U.S. and the U.K. In the process I’ve learned something surprising: It’s much easier to do in the U.K. There seemed to be much more regulation in the U.S., not least the headache of sorting out health insurance for my few employees. And there were certainly more billable hours from lawyers.
This set me thinking. We are assured by vociferous economists that economic growth would be higher in the U.S. and unemployment lower if only the government would run even bigger deficits and/or the Fed would print even more money. But what if the difficulty lies elsewhere, in problems that no amount of fiscal or monetary stimulus can overcome?
Nearly all development economists agree that good institutions—legislatures, courts, administrative agencies—are crucial. When poor countries improve their institutions, economic growth soon accelerates. But what about rich countries? If poor countries can get rich by improving their institutions, is it not possible that rich countries can get poor by allowing their institutions to degenerate? I want to suggest that it is.
Consider the evidence from the annual “Doing Business” reports from the World Bank and International Finance Corporation. Since 2006 the report has published data for most of the world’s countries on the total number of days it takes to start a business, get a construction permit, register a property, pay taxes, get an export or import license and enforce a contract. If one simply adds together the total number of days it would take to carry out all seven of these procedures sequentially, it is possible to construct a simple measure of how slowly—or fast—a country’s bureaucracy moves.
Seven years of data suggest that most of the world’s countries are successfully making it easier to do business: The total number of days it takes to carry out the seven procedures has come down, in some cases very substantially. In only around 20 countries has the total duration of dealing with “red tape” gone up. The sixth-worst case is none other than the U.S., where the total number of days has increased by 18% to 433. Other members of the bottom 10, using this metric, are Zimbabwe, Burundi and Yemen (though their absolute numbers are of course much higher).
Why is it getting harder to do business in America? Part of the answer is excessively complex legislation. A prime example is the 848-page Wall Street Reform and Consumer Protection Act of July 2010 (otherwise known as the Dodd-Frank Act), which, among other things, required that regulators create 243 rules, conduct 67 studies and issue 22 periodic reports. Comparable in its complexity is the Patient Protection and Affordable Care Act (906 pages), which is also in the process of spawning thousands of pages of regulation. You don’t have to be opposed to tighter financial regulation or universal health care to recognize that something is wrong with laws so elaborate that almost no one affected has the time or the will to read them.
Who benefits from the growth of complex and cumbersome regulation? The answer is: lawyers, not forgetting lobbyists and compliance departments. For complexity is not the friend of the little man. It is the friend of the deep pocket. It is the friend of cronyism.
We used to have the rule of law. Now it is tempting to say we have the rule of lawyers, which is something different. For the lawyers can also make money even in the absence of complex legislation.
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Lawyers gotta eat..
When the status-quo collapses, we will all come to the same conclusion that it’s the law professionals that fooked us all.
It’s the FED’s money; they can throw it around as they see fit, and if they’re in an expansive mood, let us borrow it from them — for a fee…. As to legal precedence, let me introduce you to the Federal Reserve Act.
Whether I agree with or support it is another topic altogether.
“Federal Reserve Act”
Are you saying the Act gives free license to enrich real estate investors?
If so, please post a shard of evidence.
“If so, please post a shard of evidence.”
~
I really didn’t expect to see any evidence, because I doubt it exists.
So you’re saying the Fed DOESN’T control the nation’s monetary policy? If so, please post evidence.
See how that works? Answer your strawman, Whac (and you might want to turn your sarcasm detector up a bit while you’re at it).
“(and you might want to turn your sarcasm detector up a bit while you’re at it).”
Where do you buy a sarcasm detector? Is it the same store that sells board stretchers and boxes of post holes?
“So you’re saying the Fed DOESN’T control the nation’s monetary policy?”
Not at all. I just don’t recall supporting the prices of stocks or houses as part of monetary policy. Admittedly, it has been many years since I sat through a university macroeconomics course.
Does the Fed have some kind of public decision process to choose which asset classes (e.g. stocks, houses) to protect and which others (e.g. gold, bonds) to throw under the bus?
Or do they just reward whichever class of investors they damn well please?
What do YOU think?
I figured since the Fed was part of the U.S. government (”…of the people, by the people, for the people,…” etc), perhaps there was a public policy process through which they vetted their asset price support decisions, gave the opportunity for public comment, analyzed who would be helped or hurt, etc.
Why states suffer from pension panic
June 7, 2013, 3:54 PM
By Matthew Heimer
Illinois, a state often ridiculed for its shaky management of public finances, got another black mark next to its name this week when two credit-rating agencies, Fitch Ratings and Moody’s Investor Services, downgraded their ratings on the state’s debt. Illinois is now ranked two notches lower than any other state by Moody’s; it’s tied with California for the worst rating from Fitch (though Fitch rates the outlook for California, whose budget woes have lessened of late, as “positive” while Illinois’s is “negative”).
But while Illinois’s legislature may stand out for its dysfunction, the instigating factor behind the downgrades is one it shares with many other struggling state governments. Illinois’s legislature triggered the demotions by adjourning at the end of May without having reached a compromise to close its pension program’s yawning funding gap. And the downgrade itself shows why many states face pressure to make their public-sector pension plans less generous.
When an entity’s credit rating goes down, of course, its borrowing costs rise–making any state-funded project potentially that much more expensive, and crimping the state’s ability to invest in infrastructure or economic development. The Illinois Policy Institute, a conservative research group, calculated earlier this spring that Illinois pays an average of 1.33 percentage points more in interest on new 10-year bonds than the states that have the highest credit ratings—adding $1.33 million a year in interest payments to the cost of every $100 million the state borrows. The most recent downgrade is only likely to drive those costs up further.
And with pensions making up a huge portion of most states’ budgets, fiscally shaky pension programs and downgraded debt increasingly go hand-in-hand. The table above shows how Fitch rates the 5 states that are furthest behind on funding their pensions (as calculated by the Pew Center on the States). All five rank among the 13 least credit-worthy of the 50 states; Illinois, as mentioned previously, is tied for lowest-ranked, and Kentucky is third from the bottom. And that means each state is in that much more danger of getting fish-eyed suspicion—and demands for high rates—from any lenders they do business with.
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“…it’s tied with California for the worst rating from Fitch…”
We’re Number One!
What’s more, since 2009, at least 43 states have either cut benefits, increased employee contributions or both in order to shore up their pension finances, according to the National Conference of State Legislatures. Illinois, however, remains pretty far from the vanguard of reform.
Public unions run/support their own (democrat) candidates that, in turn, give golden pensions as a reward to the support of the public unions. No democrat will EVER turn on public unions or ever take away any public union free cheese.
Nobody cares what this will do to the taxpayer, to future budgets or how these promises will ever be repaid.
Q: What is the first thing a public union goon does after he retires at age 55 with a spiked pension on disability?
A: Moves to a low tax and right to work state.
I loved how Gov Swartzenagger showed those California unions!
Because Police, Fire, and Prison Guards unions are just chock-full of Democrats.
I’m going to Sedona this week for a high school reunion. Ben, come check out the hiking trails!
http://tempo5.sandicor.com/DotNet/Pub/EmailView.aspx?r=984258692&s=SND&t=SND&m=true
this is a listing from across the street. when I moved in 2008 this house would have been in the upper 600’s! I hate the plumbing in this area!
Bad plumbing! Bad plumbing!
Would anyone believe me if I suggested that investors around the world dumped bond funds at a record rate this past week?
I thought not.
Make sure you race out of the burning theater fast enough so the door doesn’t hit your @$$ on the way out.
ft dot com
Last updated: June 7, 2013 8:44 pm
Record $12.5bn outflows from bond funds
By Michael Mackenzie and Stephen Foley in New York
Investors have pulled a record $12.53bn out of global bond funds in the past week, beating a speedy retreat from fixed income holdings that can fall in value as interest rates rise.
EPFR Global, the research firm, said the selling wave swept across all major classes of bond fund, including $6bn of outflows from junk bonds funds and $1bn from emerging markets funds.
Two-thirds of the total outflows came from US funds, where nervousness over the Federal Reserve’s next moves in monetary policy is at its height. EPFR’s data stretch back to 2001.
Market interest rates have already jumped in response to speculation that the central bank will begin to taper its purchases of bonds. Bond valuations move inversely to interest rates.
The market’s benchmark, the Barclays US Aggregate index, which consists of Treasury, mortgage and corporate debt, has registered a decline of 1 per cent for 2013, its worst year-to-date performance since the great bond market rout of 1994.
“Bond investors will get sticker shock when they start opening their monthly statements and pull money out of the sector,” said Jack Ablin, chief investment officer at Harris Private Bank.
Another research service, Lipper, also recorded an all-time high outflow from US junk bond funds in the week ended Wednesday, marking a retreat from what had been one of the hottest areas of the fixed income market in the past year.
As exchange traded fund providers and mutual funds face redemptions, they are forced to sell more of their holdings, putting further pressure on prices.
“We are definitely worried that the market is in a cycle where selling of bonds begets more selling,” said Steven Boyd, principal at Halyard Asset Management.
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It sux big time to be one of the greater fools who was lured over the past few years into buying ultra-safe bond mutual funds.
Will Mortgage Bonds Enter the Vortex?
By Matthew C. Klein Jun 4, 2013 2:21 PM PT
In my previous post, I argued that bondholders will probably be able to tolerate any “tapering” of the Federal Reserve’s asset purchases so long as they aren’t using much leverage and are willing to hold to maturity. After all, the Fed has been bidding up financial asset prices to stimulate the economy, and I doubt financial policymakers would consciously choose to inflict substantial losses on savers.
That said, the prices of bonds could get a lot more volatile over the next few years. One possible scenario: the Fed starts tapering its asset purchase program only to observe large increases in interest rates, thereby leading to an increase in stimulus. This sort of start-stop (or slow-down, speed-up) behavior would fit with the pattern we have seen over the past few years with QE1 and QE2.
While all long-dated, fixed-income securities would be affected, mortgage-backed securities could be in for a particularly rough ride because of something known among traders as a “convexity vortex.” What follows is my attempt to explain and assess this phenomenon. And, no, it does not figure in the plot of “Star Trek Into Darkness.”
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Junk bonds sell off even more than Treasurys, but they may still be a buy
June 6, 2013, 3:56 PM
Add junk bonds to the list of asset classes feeling the ripple effects of the recent rise in Treasury yields.
It wasn’t too long ago that junk bond yields were continually setting record lows. The Barclays U.S. High Yield Index dropped below 5% for the first time ever on May 7. But it quickly made a U-turn, climbing nearly 100 basis points over the next month to yield 5.91% on Tuesday.
The 10-year Treasury note, meanwhile, climbed roughly 50 basis points during May as speculation mounted over how the Federal Reserve may act to wind down its bond purchase program, which has artificially held yields down.
But because high-yield bonds sold off even more than Treasurys, the yield premium junk bond investors demanded over government debt, or spread, actually widened. That’s not usually the case for high yield bonds, which tend to be more isolated from benchmark Treasurys than other fixed-income asset classes.
Whenever Treasurys have sold off by at least 50 basis points over the last 15 years, spreads have tightened, according to the chart below from TIAA-CREF. That means junk bonds increased in attractiveness relative to their government debt peers.
But option adjusted spreads to Treasurys were hovering around 4% when junk bonds hit their lowest yield. That was lower than where spreads were before prior to most other Treasury sell-offs. So when the haven government bond yields rose, there wasn’t as much room for spreads to come in. Spreads widened to about 4.6% on Tuesday.
As a basis for comparison, spreads were similarly tight during Treasury selloffs between 2004 and 2006, and though spreads tightened as Treasury yields rose, they did so only barely, according to TIAA-CREF data.
The widening isn’t indicative of an increase in risk in the asset class; default rates have remained low even as they spark worries about protections for bondholders. If anything, it’s a reflection of the impact of uncertain monetary policy on all asset classes.
“High yield hasn’t been high yield for several years, even if spreads are historically in line. A rise in rates is going to have an outsized affect,” said Jeremy Hill, managing director at TF Market Advisors, LLC.
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Common Sense
A Bond Market Plunge That Baffles the Experts
By JAMES B. STEWART
Published: June 7, 2013
As if it wasn’t bad enough for the millions of Americans scraping by on paltry interest payments, now they face another threat: the loss of principal on their bonds and other fixed-income assets.
The month of May, and this first week of June, were terrible for many fixed-income investors who have spent the last few years reaching for higher yields.
If there was an index for fixed income with the status of the Dow Jones industrial average or Standard & Poor’s 500 index for stocks, the carnage in fixed-income markets would have been a big story and we’d all be talking about a bear market in bonds.
Consider the damage: mutual funds that invest in long-term United States Treasury bonds lost an average 6.8 percent in May, according to Morningstar, with the loss in principal wiping out years of interest payments. But that’s not the worst-hit sector. Higher-yielding bonds and fixed-income securities, to which investors have turned in droves in recent years, have suffered even more, especially mortgage-backed securities and emerging market debt, as well as just about anything that uses borrowing to increase returns.
Many individual securities and funds were hit much harder than the averages.
Vanguard’s Extended Duration Treasury Index fund was down more than 6 percent in the last month. In the mortgage area, Annaly Capital Management, a popular real estate investment trust that invests in mortgages, fell 8.7 percent, and an iShares mortgage exchange-traded fund lost 10.4 percent. Pimco’s Corporate Opportunity Fund, which is managed by the star analyst Bill Gross and which invests in a mix of corporate bonds and mortgage-backed securities and uses some borrowing, lost nearly 13.4 percent. Annualized, such declines are off the charts.
“There are many closed-end bond funds and mortgage funds that were just annihilated in May,” said Anthony Baruffi, a senior portfolio manager at SNW Asset Management in Seattle, which specializes in fixed-income assets.
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Strategies
For Retirees, a Million-Dollar Illusion
By JEFF SOMMER
Published: June 8, 2013 373 Comments
In 1953, when “How to Marry a Millionaire” was in movie theaters, $1 million bought the equivalent of $8.7 million today. Now $1 million won’t even buy an average Manhattan apartment or come remotely close to paying the average salary of an N.B.A. basketball player.
Still, $1 million is more money than 9 in 10 American families possess. It may no longer be a symbol of boundless wealth, but as a retirement nest egg, $1 million is relatively big. It may seem like a lot to live on.
But in many ways, it’s not.
Inflation isn’t the only thing that’s whittled down the $1 million. The topsy-turvy world of today’s financial markets — particularly, the still-ultralow interest rates in the bond market — is upending what many people thought they understood about how to pay for life after work.
“We’re facing a crisis right now, and it’s going to get worse,” said Alicia Munnell, director of the Center for Retirement Research at Boston College. “Most people haven’t saved nearly enough, not even people who have put away $1 million.”
For people close to retirement, the problem is acute. The conventional financial advice is that the older you get, the more you should put into bonds, which are widely considered safer than stocks. But consider this bleak picture: A typical 65-year-old couple with $1 million in tax-free municipal bonds want to retire. They plan to withdraw 4 percent of their savings a year — a common, rule-of-thumb drawdown. But under current conditions, if they spend that $40,000 a year, adjusted for inflation, there is a 72 percent probability that they will run through their bond portfolio before they die.
Suddenly, that risk-free bond portfolio is looking risky. “The probabilities are remarkably grim for retirees who insist on holding only bonds in the belief that they are safe,” says Seth J. Masters, the chief investment officer of Bernstein Global Wealth Management, a Manhattan-based firm, which ran these projections for Sunday Business. “Because we live in this world we tend to think of it as ‘normal,’ but from the standpoint of financial market history, it’s not normal at all,” Mr. Masters said. “And that’s very clear when you look at fixed-income returns.”
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Bond investors aren’t the only folks who have recently dumped their holdings.
Not to steal BILA’s thunder, but has there ever before been a better time to buy the dip in gold?
Gold Investment Sales Total $6 Billion as ‘Flood Continues’
By Claudia Carpenter & Nicholas Larkin - Jun 5, 2013 9:32 AM PT
Gold sales through exchange-traded products came to $6 billion last month as investors put more money into stocks and bonds, ETFGI Ltd. said.
The outflow for gold in May pushed the total for the first five months this year to $24.2 billion, compared with gains of $3.2 billion for the same period last year, according to data provided by e-mail today from London-based ETFGI. Commodity outflows were $6.7 billion last month compared with $25 billion added to stock ETPs and $3.1 billion to fixed income.
Gold outflows came on top of an $8.8 billion cut in April when the metal slid to a two-year low and entered a bear market. BlackRock Inc. said the April gold sales were a record. Investors cut gold-backed ETP assets that reached an all-time high in December as faith in the metal as a store of value waned after inflation failed to accelerate and confidence mounted that the U.S. economy was improving.
“The flood continues,” said Robin Bhar, an analyst at Societe Generale SA in London. “If the price does weaken as we think, it’s going to prompt more ETP liquidation.”
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Physical gold buying is brisk and YTD outdid the 2012 year, notably after April. The institutional investors and central bank manipulators have dumped paper gold while banks and small buyers are gobbling up physical.
The U.S. Mint has not produced any one tenth ounce gold since 2008, and demand is so high that the mint decided to start up production. Same for silver Eagles.
Note many coin shops charge higher and higher premiums as the fractional size decreases. So lower metals prices are a superb time to buy quarter and tenth ounce sizes.
I got this info from Kitco.
Be fearful when others are greedy. Be greedy when others are fearful. Institutional investors and governments are fearful.
There has been pent-up long-term value in Japanese stocks for nearly a quarter of a century already. Why rush to buy now?
Japanese stock in bear territory, but worth going long - Analyst
06/07/2013| 05:40am US/Eastern
Japanese stocks officially entering bear market territory overnight as the Yen got a boost ahead of the US jobs numbers which many think could undershoot. ETX’s Mark Priest says there’s long-term value in Japanese stocks.
Investors Dump Japan, but Soros May Be Buying Again
Published: Friday, 7 Jun 2013 | 3:16 AM ET
By: Dhara Ranasinghe | Senior Writer
Even as Japan’s benchmark stock index flirted with bear territory on Friday and then closed more than 6 percent lower for the week, there was some good news for the beaten-down Nikkei.
Japan’s public pension fund said on Friday afternoon that it would change its asset allocation target by lifting its weighting of domestic stocks and lowering its target allocation for Japanese government bonds.
Billionaire investor George Soros, meanwhile, returned to Japanese markets this week after his investment firm pulled out of the market in May just before the sharp sell-off in shares got underway, Dow Jones newswires reported, citing a person close to the matter.
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Billionaire investor George Soros, meanwhile, returned to Japanese markets this week after his investment firm pulled out of the market in May just before the sharp sell-off in shares got underway, Dow Jones newswires reported, citing a person close to the matter.
I must presume Soros is looking to sell….he needs buyers.
Wall Street’s Best Minds | FRIDAY, MAY 17, 2013
Will the Sun Continue to Rise Over Japan’s Stock Market?
By EILEEN DIBB
Though the Nikkei has had huge gains since November, can the good times continue? A Fidelity Investments fund pro weighs in.
After two “lost decades,” the Nikkei’s surge of more than 50% since mid-November 2012 has caught the attention of investors. They may be wondering whether Japanese equities are finally pulling out of a nearly 25-year bear market.
Or is this rapid move in the equity market simply a flash in the pan brought about by the sharp 20% depreciation in the yen? My answer is that despite the currency change, we may continue to see investment opportunities in Japanese equities driven by a sea change in the economic and political backdrop. Beyond the yen weakness, which has captured most of the headlines and helped to make the corporate sector even more competitive, the policies put forward by the new Liberal Democratic Party (LDP) administration will be vital to sustaining the upward move in equities.
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Note that the 19% drop since May 17 was sufficient to wipe out the most recent 23% (= 19%/81%) gain in the Nikkei.
By contrast, a 33%+ drop would be needed to wipe out a 50%+ gain (e.g. 34%/66% = 52%).
Because the Yen is being devalued.
I think people expect Japan to get over its aging demographic problem before Europe, so they are buying in. Just a guess.
Try not to catch yourself a falling knife.
What’s Next
Japan’s Nikkei dips into bear market territory
By Ben Rooney @CNNMoneyInvest June 7, 2013: 7:43 AM ET
NEW YORK (CNNMoney)
After shooting into the stratosphere, Japanese stocks have tumbled back to Earth.
On Friday, the high-flying Nikkei (N225) index posted further declines, at one point extending its slide from a trading high of 15,942.6 points on May 23 to more than 20%. While losses were trimmed by the close, the initial drop briefly put the leading index of Japanese stocks into a bear market.
The recovery was based on reports that the Japanese government pension fund — the largest pension fund in the world — plans to shift more of its $1.2 trillion in assets into Japanese equities.
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Click on a 3 year chart of the Nikkei. It’s as sharp as a needle.
But I am a skilled juggler. I can catch up to 4 falling knives.
Teachers need more money so they can afford a better class of prostitute. All this assistant principal could afford was a street walker and I have to imagine that is taking the risk of catching something incurable they don’t even have a name for yet.
Posted: 2:05 p.m. Saturday, June 8, 2013
Assistant principal at Royal Palm Beach High School arrested in prostitution sting
By Kimberly Miller
Palm Beach Post Staff Writer
A Royal Palm Beach High School assistant principal was arrested late Friday on charges that he tried to pick up a prostitute in Lake Worth.
Tracy Shealy, 48, of Greenacres, was arrested during a Palm Beach County Sheriff’s Office sting operation that netted 12 people suspected of soliciting prostitutes between the 1400 and 1800 blocks of North Dixie Highway, said Deputy Eric Davis, sheriff’s spokesman.
School police will be working with the proper authorities, and the school’s administration will be looking into this issue Monday morning, said Vicki Middlebrooks, spokeswoman for the Palm Beach County School District.
“If the allegations prove to be true, this conduct is unacceptable and inappropriate and the appropriate disciplinary action will be taken,” Middlebrooks said. School employees are supposed to self-report all arrests, she said.
Online sheriff’s office records show Shealy was released from the Palm Beach County Jail this morning on his own recognizance. A message left at the phone number listed in school district records for Shealy was not immediately returned.
According to the Royal Palm Beach High School website, Shealy has been an educator and coach for more than 23 years. He has a bachelor’s degree in physical education and earned a master’s degree in educational leadership from Nova Southeastern University in 2009.
School district records show Shealy was hired in 2000.
Rent free
What does the American public hold in lower regard than slime mold, gonorrhea, pornography, polygamy and cockroaches?
Why Realtors of course.
“What does the American public hold in lower regard than slime mold, gonorrhea, pornography, polygamy and cockroaches?”
According to the mainstream media that would be white Christians who own guns and oppose President Obama’s policies.
I call a bottom on the Congressional approval rating. Like real estate, this figure can only go up from here!
Pathetic: Congress Approval Rating Plunges to Six Percent
Katie Pavlich | Jun 05, 2013
If you thought the approval rating of Congress couldn’t get any worse, think again. Rasmussen is out with new numbers and they’re really ugly.
…
“Best Explanation on the Fake Housing Market Recovery I’ve Seen”
http://smallbusiness.yahoo.com/advisor/best-explanation-fake-housing-market-recovery-ve-seen-162530153.html
First the HBB, then Mark Hanson, then Ritholtz…… now it’s gone mainstream.
Like I said, they will figure out whay they are going to do with house prices (among other things) at Bilderberg this weekend.
From “Best Explanation on the Fake Housing Market Recovery I’ve Seen”
“Major financial institutions like The Blackstone Group L.P. (NYSE/BX) have become major buyers in the U.S. housing market. Blackstone has spent more than $4.0 billion for 24,000 homes in the U.S. housing market that it plans to rent out.”
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Blackstone also ventured into other businesses, most notably investment management. In 1987 Blackstone entered into a 50–50 partnership with the founders of BlackRock, Larry Fink and Ralph Schlosstein. The two founders, who had previously run the mortgage-backed securities divisions at First Boston and Lehman Brothers Kuhn Loeb, respectively, initially joined Blackstone to manage an investment fund and provide advice to financial institutions. They also planned to use a Blackstone fund to invest in financial institutions and help build an asset management business specializing in fixed income investments.[3][38]
http://en.wikipedia.org/wiki/Blackstone_Group - 199k -
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BlackRock was founded as BlackStone Financial Management within the private equity firm Blackstone Group in 1988. Larry Fink, BlackRock’s founder and CEO, had joined Blackstone in 1988 as a partner, along with Ralph Schlosstein, former White House aide under the Carter administration, and Robert Kapito and Sue Wagner. Before joining Blackstone, Fink was a managing director at First Boston, where he pioneered the mortgage-backed securities market in the United States. In 1992 Fink, Schlosstein and Co separated from the Blackstone Group under the name BlackRock and aggressively re-invented it as an independent asset-management company. In 1995, PNC Financial Services Group purchased BlackRock and in 1999, assets under management had grown to $165 billion and the firm decided to go public.1
Role in 2008-2009 Bailout, Management of Maiden Lane Portfolios
BlackRock Financial Management Inc. was retained by the New York Fed to manage and eventually liquidate the assets held in newly formed Delaware limited liability companys (LLC) to fund the purchase of residential mortgage-backed securities (RMBS) from the securities lending portfolio of several regulated U.S. insurance subsidiaries of AIG, as well as Bear Stearns. These companies were formed in late 2008 under the names Maiden Lane LLC (which was incorporated with the purpose of facilitating “the merger of the Bear Stearns Companies, Inc. and JPMorgan Chase & Co.”),
http://publicintelligence.net/blackrock-inc/ - 104k
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18.10.2011
Some people have started realizing that there are large financial groups that dominate the world. Forget the political intrigues, conflicts, revolutions and wars. It is not pure chance. Everything has been planned for a long time.
Some call it “conspiracy theories” or New World Order. Anyway, the key to understanding the current political and economic events is a restricted core of families who have accumulated more wealth and power.
We are speaking of 6, 8 or maybe 12 families who truly dominate the world. Know that it is a mystery difficult to unravel.
We will not be far from the truth by citing Goldman Sachs, Rockefellers, Loebs Kuh and Lehmans in New York, the Rothschilds of Paris and London, the Warburgs of Hamburg, Paris and Lazards Israel Moses Seifs Rome.
Many people have heard of the Bilderberg Group, Illuminati or the Trilateral Commission. But what are the names of the families who run the world and have control of states and international organizations like the UN, NATO or the IMF?
To try to answer this question, we can start with the easiest: inventory, the world’s largest banks, and see who the shareholders are and who make the decisions.
The world’s largest companies are now: Bank of America, JP Morgan, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley.
Let us now review who their shareholders are.
Bank of America:
State Street Corporation, Vanguard Group, BlackRock, FMR (Fidelity), Paulson, JP Morgan, T. Rowe, Capital World Investors, AXA, Bank of NY, Mellon.
JP Morgan:
State Street Corp., Vanguard Group, FMR, BlackRock, T. Rowe, AXA, Capital World Investor, Capital Research Global Investor, Northern Trust Corp. and Bank of Mellon.
Citigroup:
State Street Corporation, Vanguard Group, BlackRock, Paulson, FMR, Capital World Investor, JP Morgan, Northern Trust Corporation, Fairhome Capital Mgmt and Bank of NY Mellon.
Wells Fargo:
Berkshire Hathaway, FMR, State Street, Vanguard Group, Capital World Investors, BlackRock, Wellington Mgmt, AXA, T. Rowe and Davis Selected Advisers.
We can see that now there appears to be a nucleus present in all banks: State Street Corporation, Vanguard Group, BlackRock and FMR (Fidelity). To avoid repeating them, we will now call them the “big four”
Goldman Sachs:
“The big four,” Wellington, Capital World Investors, AXA, Massachusetts Financial Service and T. Rowe.
Morgan Stanley:
“The big four,” Mitsubishi UFJ, Franklin Resources, AXA, T. Rowe, Bank of NY Mellon e Jennison Associates. Rowe, Bank of NY Mellon and Jennison Associates.
We can just about always verify the names of major shareholders. To go further, we can now try to find out the shareholders of these companies and shareholders of major banks worldwide.
Bank of NY Mellon:
Davis Selected, Massachusetts Financial Services, Capital Research Global Investor, Dodge, Cox, Southeatern Asset Mgmt. and … “The big four.”
State Street Corporation (one of the “big four”):
Massachusetts Financial Services, Capital Research Global Investor, Barrow Hanley, GE, Putnam Investment and … The “big four” (shareholders themselves!).
BlackRock (another of the “big four”):
PNC, Barclays e CIC.
Who is behind the PNC? FMR (Fidelity), BlackRock, State Street, etc.
And behind Barclays? BlackRock
And we could go on for hours, passing by tax havens in the Cayman Islands, Monaco or the legal domicile of Shell companies in Liechtenstein. A network where companies are always the same, but never a name of a family.
In short: the eight largest U.S. financial companies (JP Morgan, Wells Fargo, Bank of America, Citigroup, Goldman Sachs, U.S. Bancorp, Bank of New York Mellon and Morgan Stanley) are 100% controlled by ten shareholders and we have four companies always present in all decisions: BlackRock, State Street, Vanguard and Fidelity.
In addition, the Federal Reserve is comprised of 12 banks, represented by a board of seven people, which comprises representatives of the “big four,” which in turn are present in all other entities.
In short, the Federal Reserve is controlled by four large private companies: BlackRock, State Street, Vanguard and Fidelity. These companies control U.S. monetary policy (and world) without any control or “democratic” choice. These companies launched and participated in the current worldwide economic crisis and managed to become even more enriched.
To finish, a look at some of the companies controlled by this “big four” group
Alcoa Inc.
Altria Group Inc.
American International Group Inc.
AT&T Inc.
Boeing Co.
Caterpillar Inc.
Coca-Cola Co.
DuPont & Co.
Exxon Mobil Corp.
General Electric Co.
General Motors Corporation
Hewlett-Packard Co.
Home Depot Inc.
Honeywell International Inc.
Intel Corp.
International Business Machines Corp
Johnson & Johnson
JP Morgan Chase & Co.
McDonald’s Corp.
Merck & Co. Inc.
Microsoft Corp.
3M Co.
Pfizer Inc.
Procter & Gamble Co.
United Technologies Corp.
Verizon Communications Inc.
Wal-Mart Stores Inc.
Time Warner
Walt Disney
Viacom
Rupert Murdoch’s News Corporation.,
CBS Corporation
NBC Universal
The same “big four” control the vast majority of European companies counted on the stock exchange.
In addition, all these people run the large financial institutions, such as the IMF, the European Central Bank or the World Bank, and were “trained” and remain “employees” of the “big four” that formed them.
The names of the families that control the “big four”, never appear
+1 And one day a huge swift asteroid will reset everything. Poof!
Role in 2008-2009 Bailout, Management of Maiden Lane Portfolios
BlackRock Financial Management Inc. was retained by the New York Fed to manage and eventually liquidate the assets held in newly formed Delaware limited liability companys (LLC) to fund the purchase of residential mortgage-backed securities (RMBS) from the securities lending portfolio of several regulated U.S. insurance subsidiaries of AIG, as well as Bear Stearns. These companies were formed in late 2008 under the names Maiden Lane LLC (which was incorporated with the purpose of facilitating “the merger of the Bear Stearns Companies, Inc. and JPMorgan Chase & Co.”), Maiden Lane II LLC and Maiden Lane III LLC (which were formed to fund the purchase of certain multi-sector collateralized debt obligations (CDOs) from certain counterparties of AIG Financial Products Corporation). In early 2009, the collective worth of these companies was more than $200 billion. According to Bloomberg, as of July 2009, BlackRock received at least $71 million in the first year of contracts to oversee assets previously owned by Bear Stearns Cos. and American International Group Inc. BlackRock is received $45.3 million that year for running the Maiden Lane holdings that the Federal Reserve took over from Bear Stearns, based on contract terms released by the New York Fed. The company earned another $25.5 million to manage the Maiden Lane II and Maiden Lane III investments that the Fed purchased from AIG.4
In the initial stages of the U.S. government’s bailout of the financial system, Maiden Lane III paid large sums of money to a number of other European banks, including some U.S. institutions already receiving money from the government. Though these transactions were ostensibly designed to pay debts on credit default swaps held by AIG Financial Products, Maiden Lane III ultimately served as a conduit to funnel large sums of taxpayer money to pay off private debts owed to foreign corporations. These “counterparties” to so-called “toxic assets” held by AIG were paid more than $27.1 billion through Maiden Lane III, including Deutsche Bank, Landesbank Baden-Wuerttemberg, Deutsche Zentral-Genossenschaftsbank, Dresdner Bank AG, Goldman Sachs, Société Générale, The Royal Bank of Scotland, Barclays, the Bank of Montreal, Rabobank, Calyon, Wachovia, and UBS, among others. These payments occurred from September 16-December 31, 2009.
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