Bits Bucket for June 15, 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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Good morning, people that live in their parent’s basement.
No “pent-up demand” for $500,000 starter homes from these loosers:
http://articles.washingtonpost.com/keyword/youth-unemployment
That’s odd… that’s the boot-strappers capital of the world!
Good morning Debt Donkeys.
Are you a native born American? Well, then, you’re a real POS because immigrants are more fertile than you, nyah, nyah! (Of course, they’re splatting ‘em out on your dime)
http://www.usatoday.com/story/onpolitics/2013/06/14/jeb-bush-immigration-fertile/2424183/
Even some of the Latinas are offended. You can’t make this stuff up.
I guess being gaffetastic runs in the family, considering what has come out of the mouths of his parents and brother.
I went to a high school graduation a few days ago. One of the 5 valedictorians gave her speech entirely in Spanish. Oh but she was just celebrating her heritage, how dare I think there’s anything wrong with it? Funny though I didn’t see any Germans or Italians or Swedes or Poles celebrating their heritage with speeches in their ethnic tongues.
Also, 5 valedictorians. Uhm, what? The whole idea of a valedictorian is to reward the person with the best grades. But in the age of “can’t hurt anyone’s self esteem” I guess bhat’s no longer the case.
Interesting…Makes me ponder what the justification was for allowing it…
Allowing it? Good luck to a principal who would have said no. He/she would have been run out of town for being raaaaaacis
My HS had 2 one year exact same grades……what should they do flip a coin?
Do you think all of these 21 had the exact same GPA?
http://www.nbcnews.com/health/were-all-no-1-21-valedictorians-too-many-6C10164648?franchiseSlug=healthmain
Soon enough everyone will be a valedictorian. After all it’s so unfair that some people get to be and some don’t. Just like it’s unfair that some people have more money than others. We should all be equal. Anything else is unfair (and probably racist too).
…and you’ll need a certificate from a CC just be a janitor.
How many of you had parents who were paid per child from birth, month after month, year after year until the children were 18? Anyone? Anyone?
These “immigrants” are PAID to have kids. Also, in many cases (in this area, anyway) the cost of their housing is partially defrayed by the USDA. They RECEIVE food stamps. They RECEIVE sacks of food from local charities. Their chidlren get free education and free school lunches, even other meals. Frequently they DO NOT pay taxes. They RECEIVE free or low cost health care (around here).
If you were poor, the above would all be a pretty good incentive to be as fertile as possible.
What do these kids do when they’re over 18 and their best prospects are WalMart and Mickey D jobs? Some take them, some want to be “activists”. But then isn’t it much better to go into the family business? (I would argue not, but judging from what I see around here, the kids disagree with me.)
If you think ANYONE is living the Life of Riley from “welfare (TANF, SNAP, Sec 8, SS Disability) and that those moneys just “fall” into their laps, you really should get out more often.
So the word “valedictorian” is evolving into a new definition; languages do that. And these dreadful leech children got 4.0 or better GPAs. What a shameful wa$te of public monies!
My guess is that a large number of parents in the audience spoke Spanglish only, and the speech was a courtesy to them for having raised model citizens in a new homeland. What makes you think they came here illegally or “RECEIVE food stamps” and “sacks of food”?
In any case, these kids are here, they’re graduating into the work force, and they’ll be paying your SS when you’re an old coot, so instead of whining about it and isolating yourself further into your disgruntlement, why not take some night classes and learn Spanish? Or Mandarin?
Where can I gets me some of them free sack lunches??
they’ll be paying your SS when you’re an old coot,
Don’t forget fight the wars smithers and bananas love so much. Blacks ain’t fighting any more. It’s either po whites or hispanics. My bet is po whites will completely stop participating from all civic duties including warfares if they know the real truth about republican party.
Well, you do have a point there. Graduation ceremonies are mostly for the benefit of the parents. If you’re going to have a ceremony for the gratification of parents, and a lot of those parents can only speak Spanish, it seems reasonable to have part of the ceremony in a language that they can understand.
On the other hand, I think that Smithers is addressing a larger legitimate concern many Americans have. Immigration into this country has generally been of great benefit to these come here. But their has always been a price to be paid as well. Immigrants either have to learn English or suffer the consequences of living in a country whose language they don’t understand. This is what the Germans, Italians and so forth had to go through. To some people it appears that that arrangement is now being changed without any public debate regarding its costs and benefits.
On a related note, Arizona State University has additional graduation ceremonies for blacks, Hispanics, etc. Something about this seems unhealthy to me. The next step could be separate water fountains for each race.
https://graduation.asu.edu/ceremonies/special
“And these dreadful leech children got 4.0 or better GPAs”
Oh, you mean like in Atlanta? And anywhere else where those numbers are gamed? Meaningless number anymore in so many places.
“My guess is that a large number of parents in the audience spoke Spanglish only, and the speech was a courtesy to them for having raised model citizens in a new homeland.”
Why not raise those “model citizens” in their own homeland?
“What makes you think they came here illegally or “RECEIVE food stamps” and “sacks of food”?”
Because I’ve seen it with my own two beady eyes here in Florida’s own illegal immigrant central. Including the food sack lines. You have to climb over the “clients” to get into the thrift store attached to the charity.
“In any case, these kids are here, they’re graduating into the work force, and they’ll be paying your SS when you’re an old coot,”
Yep, seen ‘em in the work force. I was especially impressed with the young lady watching drug cartel snuff films on her smart phone during her lunch break. I will say, she was very articulate and detailed in describing the various procedures and methods. Fascinating.
I doubt they’ll be paying my SS, because I doubt it’ll even be there. And I’m pretty sure some part of what I’m paying now goes to them at this time.
My dad used to say, the pendulum swings in one direction, then swings in the other.
My old school now makes Valedictorian anyone with a GPA over 4.0, (which is not that difficult with several AP classes) to combat all of the students who avoid the difficult classes to keep a high GPA.
Did they have identical GPAs? How big was the class?
My class only had one valedictorian…out of a class of about 50. My wife was one of a few valedictorians, but her class was many hundred, and I think the story was that each valedictorian had the same GPA…
We really ought to stop letting employers hire these people illegally. If the illegal jobs went away, the illegal immigrants would go away too.
Good luck with that.
Wife and I are considering moving to the NC area and spent some time running numbers last night. We pulled up our tax assessment and Zillow price for our house (purchased about 3 years ago) and my wife nearly fell out of her chair. “Who on earth could afford to pay that for this house?!”. I just shook my head. Up about 50% in 3 years although, very few comparable sales to validate that number. We probably could afford this house at that price, but our lives would not be nearly as easy. That’s really the biggest thing; who’s going to buy it when the price is so high that only 2-3% of the population can realistically afford it. I was worried enough when it was ~10% that could afford it, now it’s even worse.
The next thing we looked at were the state taxes in NC. We currently live, BTW, in FL. This was my turn to nearly fall out of my chair. My income tax in NC would be about 1/2 the mortgage on our current house (which includes RE tax, homeowners and flood). If you strip out all the “other” stuff in our mortgage, the tax in NC is equivalent to our principal + interest payments here in FL (on what I consider an expensive house). I realize you get to deduct the state tax from federal, but that only takes about 30% of the sting out (and then, IIRC, only if the AMT doesn’t kick in, which, for us, it has the last few years).
Conclusion; we’re likely staying in FL. Even though houses are pretty inexpensive in the Charlotte area, and, it would be very nice for me to be so close to a big airport for work, there’s no way way can make that pencil out.
In case you’re wondering, here’s the actual tax computation for NC (for over 100K income).
$6,787.50 + 7.75% OF THE AMOUNT OVER $100,000
That is absurd. 7,750.00 per 100K? Good then they have all those captive bankers stuck in Charlotte, not many high income people are going to move there voluntarily to take part in that tax system!
Man, great minds think alike! See my post below. I think the SC upstate is where it’s at.
It looks like the top marginal income tax rate in SC is 7% and the top rate starts in at $13.8k.
But I am always told by my liberal betters here that high taxes = prosperity for one and all.
Only the rich.
THIS is EXACTLY like 05-07. Lordy…
Who’s turning off the lights?
I drove around some ‘hoods this morning with my coffee in hand… I noticed several houses back on the market that I looked at back in 2008-2010.
not many high income people are going to move there voluntarily to take part in that tax system!
If you are looking to relocate and state income tax rates play a key part in your decision making process then start by looking in states with no or low state income taxes.
If proximity to a big airport is important, then how about Orlando, Las Vegas, Dallas or Houston? Florida, Texas, and Nevada have no state income tax.
Wyoming has no state income tax AND low property taxes! So what if you have to live in Cheyenne or Laramie? (OK, if you’re really rich and don’t need a job, you can live in Jackson).
I wonder why no state income tax…could it be that Wyoming receives more federal tax dollars per capita in aid than any other state except Alaska??
The philosophy was always that the sales tax was there instead of an income tax. And you can keep the money if you keep the mandates too. They’ve got plenty of coal and oil to sell you if the federal land becomes state land.
I live in FL currently. Miami would be a good option, but it costs too much. Orlando, not a chance in h*ll. I hate Orlando. It’s WAY too hot, too many tourists, and too many FL backwoods people. Can’t stand that area.
Dallas/Houston would be a great from a work perspective. Particularly Dallas; nothing in the US is more than about 3 hours away, big airport, cheap housing. Problem is, I’d have to live in Dallas.
Again, too hot, no mountains, and too crowded in the middle of the city.
I’ve considered something like Denver (I really like mountains), good climate, great outdoors activities, not too much rain. Problem is, get’s really cold and it’s expensive. The Charlotte area, for me, is really pretty ideal, not too cold, mountains/outdoors stuff nearby, big airport. But the state income tax is probably going to quash that dream; no way I’m paying 10’s of thousands a year for the privilege of living in the state.
So, all that said, I’ll likely stay in S. FL and just deal with the time on planes. It’s not ideal, but, at the same time, it would be much worse.
“then start by looking in states with no or low state income taxes.”
It doesn’t make much of a difference. Low or no state income tax = high property and sales tax. I live in WA state with 0% income tax. Yeay! Well not so fast. Sales tax is 8.9% in my county. In Seattle it’s 9.5%. Property tax….astronomical. We have among the highest gas costs in the country thanks to a high gax tax. And there’s a hidden tax or fee on everything. On the other hand in Idaho, just a few miles away, state income tax is 6%. OH NO!! Again, not so fast. Sales tax is only 6%. Gas is 30 cents cheaper. Car registration is 1/2 the price. Property tax is about 35% less. In the end it more or less balances out.
I’ve lived in several states over the years and I’ve come to realize you pay the same amount more or less no matter where you live. The difference is only in the method by which the govt collects the money.
There are a few exceptions like CA, NY, NJ where EVERY tax is high. But aside from those extreme liberal basket cases, most states end up taxing you about the same amount at the end of the day.
In the end it does not matter since all the taxes add up to roughly the same. Look at what is important to you in terms of quality of life and the options that are available.
Also, note that there are a lot of people making far less than overtaxed and still living their life. You have to decide on what is important to you and act accordingly.
There are 2 ways to minimize
1. Live on the border of two states. For example, live in Vancouver, WA (no state income tax) and shop across the river in Oregon where there is no sales tax.
2. If you own a vacation home, get in in a no income tax state and claim that as your primary residence. It’s cheating of course, but there’s always a way around the rules.
You can always arbitrage taxes, just takes a little effort.
what about western nevada
“In the end it does not matter since all the taxes add up to roughly the same. Look at what is important to you in terms of quality of life and the options that are available.”
Not even close. There’s no way in he** I spend anywhere near that in state taxes (property, car registration, trash, etc) today. Unless NC has a negative property tax rate, it would be a LOT more for me to move there compared to FL (assuming I bought another home in the same price range I bought my FL house).
Not saying that it’s a bad place to live; however, I’m not going to pay over 10K a year for the privilege of living in NC. I’m pissed enough about my 7K property tax down here in FL, paying over double that in income tax and then property tax on top of it? No thanks.
“There are a few exceptions like CA, NY, NJ where EVERY tax is high.”
CA property taxes aren’t nearly as bad as NY/NJ. It’s about 1-1.2% of purchase price, but because of Prop 13, can’t go up by more than 2% per year.
Let’s say you buy for $100k, for round numbers, your property taxes are $1k. Let’s assume 3% home price appreciation (close to inflation–and not unusual), 10 years later, the home is now worth $134k. Your property taxes though would only be about $1,220 per year (0.9%). You can imagine what the math looks like if you have greater than 3% home price growth.
Combined with terrible pension rules, prop 13 is completely screwing up the state finances, as well as the housing market.
Property taxes make up less and less of the state revenue on a percentage basis because of prop 13, so they make up for it with other taxes and fees. And there is a disincentive for retired folks to move out of the house in which they raised their family.
There is also a disincentive for anyone who happened to buy at a good time in the cycle to sell and move to a different house.
You just blew your RE math cred, Rental.
Property tax in CA is indeed 1% of assessed base, but that base does not go up every year; it remains at the original assessment unless you modify the building or sell it. And that 2% appreciation is 2% of 1% of the base, which in your hypothetical case amounts to a maximum of $20/100K/year. (Assuming there is some mythical $100K house for sale somewhere in CA.)
Now, “special assessments”, county improvement bonds, school taxes, utility district fees ad infinitum are added on as local voters decide, and can up the tax bill significantly.
“You just blew your RE math cred”
Liars have no credibility.
Rental Watch,
How much did you pay for the depreciating shack you bought in 2011?
Slithers:
Taxes in Arizona are way higher than taxes in CA, overall. Taxes in Virginia are less than either one. So much for “extreme liberal basket cases” having higher taxes.
“And there is a disincentive for retired folks to move out of the house in which they raised their family.”
+1 Around San Jose, CA the result has trended toward older people in huge homes while younger families raising children are resigned to apartments.
The math is the same. And according to my property tax bill, the assessed value of my home went up by 2% last year. You would be hard pressed to find anyone who said that home values went up by exactly 2%…this calc was limited by Prop 13.
In any event, as I said, the math is the same:
Property tax math on $100 of purchase price:
$1 * 1.02^10 = $1.22 Property taxes after the decade…max.
Property value math on that $100 of purchase price:
$100 * 1.03^10 = $134 home value after a decade of 3% inflation.
So, after 10 years, you are effectively paying 0.9% of your home’s value as property tax ($1.22 of Prop 13 limited tax divided by $134 of market based value).
BTW ahansen, citing my 2nd year property tax bill…the property tax rate is still 1%…it’s just that my assessed value increased by 2%, but in any event, it doesn’t matter…the math is the same, and the effect is the same.
Your property taxes can only rise by 2% per year, even if property values are going up by more than 2% per year. Over a long period of time, it means that the total property taxes collected become a smaller and smaller fraction of total market value of real estate in the state.
Taxes in Arizona ARE NOT AT ALL higher than California overall. What are you smoking? State income tax rate is half that of California. Sales tax is about the same. Property tax is about the same, depending on which Arizona county and could be less per $100,000 in some counties. Capital gain tax rate is dropping to 3.4%. In California anyone with incomes above $48,000 pays above a nine percent rate.
True high income people do not pay state income axes.
True. They make their state residence a no tax state, the way Smithers does. They vote in the no tax state, have drivers license there, pay utilities there. They visit “upscale” states such as coastal part of California, even rent VRBOs there. But they do not pay the taxes of the “upscale” states.
The high end of the wealthy (liberal Hollywood types) “appear” to be residents of the high tax states but their accountants tell them how they must live, pretend to be charitable (for a big tax break), and so on. The gullible think the elitists in Malibu pay high taxes.
The wealthy laugh at the poseurs who pay the taxes and chant that even though the taxes are high, so are their incomes they earn as residents in those “upscale” states.
I realize you get to deduct the state tax from federal ??
probably not for much longer…Keep that in mind when you buy…That deduction is high on the radar for elimination from the tax code…
What about the sacrosanct mortgage interest deduction (aka WELFARE FOR THE WEALTHY). Is there any remaining talk of rolling that back?
“What about the sacrosanct mortgage interest deduction (aka WELFARE FOR THE WEALTHY). Is there any remaining talk of rolling that back?”
Only the wealthy pay income taxes, therefore by definition only the wealthy benefit from a tax deduction.
Rich guys rule, workers drool.
ft dot com
May 30, 2013 6:28 pm
Offshore wealth grows despite crackdown on tax havens
By Vanessa Houlder
Great Tax Race
The wealth held in offshore financial centres grew by hundreds of billions of dollars last year in spite of the international crackdown on tax evasion, according to new figures.
Offshore wealth, defined as assets booked somewhere other than the investor’s home country, rose by 6.1 per cent to $8.5tn, with Switzerland the most popular destination, according to new figures from the Boston Consulting Group.
The robust health of the offshore industry is likely to fuel the controversy over the role of tax havens which are under pressure from governments in Western Europe and the US that are struggling with big budgetary deficits, as well as from developing countries.
Offshore centres have signed dozens of information-exchange agreements since the launch of the international crackdown on evasion in 2009. They have also been forced to agree an automatic exchange of data with the US and are under pressure to make further concessions on transparency in the run-up to next month’s G8 summit in Northern Ireland.
The strong performance of the offshore centres amid a growing crackdown on evasion is seen by some experts as evidence that investors are using offshore centres for reasons other than hiding money.
Jason Collins, head of tax, at Pinsent Masons, a law firm, said: “The raft of tax information disclosure deals signed by traditional European banking centres have not had a significant impact on the amount of money and assets held there which supports the idea that only a small fraction of overseas money held in those jurisdictions is for tax avoidance or evasion.”
He said the use of offshore centres by wealthy individuals from places like the former Soviet states and China reflected fears that their domestic banks were not safe from financial problems or government intervention. He said: “While it is true that some individuals will use banking centres like Switzerland or Liechtenstein to avoid or evade taxes, many are using these banking centres for the security they provide their assets.”
But critics of tax havens maintain that the continued growth in offshore wealth reflects the ineffectiveness of the transparency measures introduced since 2009. These treaties generally required specific information about the alleged evader before tax information was exchanged between countries.
…
State income taxes are not deducted as it relates to the Alternative Minimum Tax calculation…so the deduction even today doesn’t do as much good as you might think.
Overtaxed,
Someone making $100K is not paying $6787 in state income tax. That’s if you make $100K ADJUSTED. To get to $100K adjusted income for a state return, you need to make close to $200K in gross income.
A good way to check this stuff out is use turbotax. You don’t pay for TT until you file. So just create an account, enter your data in and play around with what you’d pay in different states.
Here’s something else to consider: many high income individuals compare NC’s income tax rates to their current state’s rates.
Relative to FL, NC is quite a step up. If you are currently in NY or NJ, then NC’s top rate of 7.75% doesn’t look quite so painful, especially when you combine it with the lower cost of living in NC relative to the states in the northeast.
We just bought a short sale near the LA area in November 2012 for $352k, did some renovations to get everything up to current standards (all new electrical, all new sewer to street, refinished original hardwood, etc.), $32k. And our realtor came to use last week with a buyer for $450k. Prices are very unrealistic. But at the same time we then started to see what we could buy next. There is almost nothing out there to buy in any decent areas near LA for under $500k with 2 bed 2 baths, similar to our house. In the city we are in as a reference there are 6 houses on the market for under $500k.
The only thing I could think of was taking whatever profit and moving out of the country for a while.
After you pay the realtor and closing costs, you will not have enough profit to make it worth your while. If this bubble continues, however, you may end up with a windfall.
I’d live in a self-built Teepee in the woods before I would live in a relative’s basement.
jess, OT, but in your opinion, where’s the best place to live in the upstate? Is Landrum nice? I’m thinking of a place with a little bit of elevation so it’s cooler in the summer, anything like that in the upstate?
Jose, I’m in the upstate too. If you have to have elevation, Traveler’s Rest is nice (The Cliffs is where the rich people live), and personally I like the Walhalla area too. I don’t know anything about Landrum. If you don’t need elevation and want good schools, the Five Forks / Roper Mountain Road area of Simpsonville is great.
Thanks, perk. I’m looking for something as close to the WNC border as possible, the elevation thing has to do with having a bit cooler weather in the summer. Traveler’s Rest seems to be the default location for those who can’t afford the Asheville area, mainly due to lack of employment, taxes, etc. I’ve heard it’s nice. Taxes are a factor for me, NC seems to tax like the Northeast, though on a smaller scale.
We started looking at WNC, looking for a cooler but still moderate climate (Florida summers starting to get to me). Will look into Traveler’s Rest and Walhalla, thanks again.
Real estate prices seem to be pretty good, too. Looks like you get a lot of bang for the buck in upstate SC.
Did I miss the S.C. memo? Is that the Half-backers-God’s-Country now?
My new neighbs just returned with fresh S.C. plates on their cars (for car insurance purposes). No doubt they are still FL residents for tax and estate purposes.
Hate the game!
That’s weird. Most half-backers do the WNC thing and retain Florida residency for tax and estate purposes.
I’m just looking for a more comfortable year round situation is all.
Upstate SC has Greenville for employment and I’ve heard good things about it.
Did I miss the S.C. memo? Is that the Half-backers-God’s-Country now?
I seem to recall reading that there is a movement where Fundies move to SC and plan on turning it into a theocracy.
“Did I miss the S.C. memo?”
Greenville is great. 30 minutes to the mountains, 3 hrs to the beach (Charleston). Low cost of living, low gas prices, friendly people beautiful downtown. Also a lot of big factories (GE, Michelin, BMW) and low unemployment.
I’m not a Realtor, in spite of what HA says. But I have lived all over the southeast (NC, VA, KY, AL, FL, GA, SC), and the upstate is my favorite of all of them.
“I seem to recall reading that there is a movement where Fundies move to SC and plan on turning it into a theocracy.”
You’re right. They saw how successful communists were with that plan in California and decided to give it a shot in SC. It’s all a conspiracy dude. And I think Bush is involved somehow too.
perkonkrusts must be white.
And a Realtor.
“Comment by Skroodle
2013-06-15 09:35:26
perkonkrusts must be white.”
What’s your point? Really, what’s your point, or do you just think that’s, like, a really cutesy remark to make? Tee-hee, ooh, tra-la, tee-hee, so very witty and trendy and relevant. Tra-la-la-la! Oooh, hooh-hooh, tee-hee!
Charleston is a lot different town when your skin ain’t white.
Yeah North Charleston and west Ashley are some serious hell holes…..I used to live off Ashly Phosphate road…..but downtown & mt pleasant have become much better after hugo…
And that west ashley bike trail has become a crime area too.
Exactly. If I’m moving back in with mom, she’s going to the basement.
“I’d live in a self-built Teepee in the woods before I would live in a relative’s basement.”
And whose Pop Tarts ‘ya gonna eat out in the woods?
Get a loan today, be in debt for 30.
Get on the right side of this loan for thirty and you’ll get to go to the beach while the guy on the other side gets to go to work.
What’s really nifty about this loan for thirty business is that it’s set up whereby the money you loan out for thirty actually belongs to somebody else.
At 76 my interest in the beach will be minimal.
You don’t trust the blue pills?
Holy sufferin’ $hit yer old.
Maybe a new moniker…. something like RustyAss? Rusticles?
Why buy a house today and these massively inflated prices? Rent for half the monthly cost and buy later after prices crater for 65% less.>/i>
The race to the exits is underway. Try not to get trampled by investors rushing out of the crowded theater to avoid the flames which threaten to engulf them.
Housing Market Watchers Edgy As Mortgage Rates Keep Climbing
by Yuki Noguchi
June 14, 2013 5:06 PM
2 min 28 sec
Home values have been rising in recent months, but mortgage rates have taken a rapid turn upward as well. Some investors are worried that the housing recovery may stall if mortgage rates jump too quickly.
The Federal Reserve has two main missions: to maximize employment and minimize inflation. Right now, there are few, if any, signs that prices for goods are spiking, and the job market is still crawling out of its long, deep slump.
The central bank has tried to protect the nascent recovery by keeping interest rates low. One of the ways it does this is by buying massive amounts of Treasury bonds and mortgage-backed securities. The Fed has also reminded investors that it will continue taking such steps until the jobless rate declines to 6.5 percent.
But investors aren’t heeding the Fed’s assurances that, when the time comes, it will wind down its stimulus very slowly.
“I think we, along with many other forecasters, had anticipated that rates were going to rise this year,” says Michael Fratantoni, a vice president of research for the Mortgage Bankers Association. “But [we] had anticipated a gentle floating up of rates as opposed to a sudden jump like we’ve seen.”
Fratantoni says that last week, refinancing activity declined 36 percent from the previous month, largely because most eligible homeowners already locked in record-low rates near 3.5 percent.
“Once rates are up close to 4 percent, as they are now, you have a very large number of people that just have no incentive to refinance anymore,” Fratantoni says.
…
According to the HBB’s old friend Douglas Duncan, the Fed has long-term rates under control.
Time will tell.
Mortgage Rates Aren’t Going Back Down: Fannie Mae Economist
By Lauren Lyster | Daily Ticker – Thu, Jun 13, 2013 1:40 PM EDT
In the latest gauge of rising rates, mortgage giant Freddie Mac reports rates for home financing are just shy of 4-percent this week, the highest since the week of April 12, 2012.
What’s different this time around, according to Doug Duncan, chief economist at Fannie Mae (the other government-owned mortgage giant), is that mortgage rates aren’t going back down. That’s one of the things he tells The Daily Ticker in the accompanying video.
While he doesn’t see rates headed back down, Duncan says he does think the Fed will work hard to try to prevent rates from going further up from here and may try to hold them here through the end of the year.
Fannie Mae just released its mid-year economic outlook and sees a strengthening housing market pushing the economy forward at a lethargic 2.1 percent rate in 2013.
…
Mortgage rates are set to retrace to 2011 levels. The increase in the 30-year mortgage rate mentioned in the article, from 3.35% to 3.98%, knocks 7.5% off the amount of principle that can be financed off the same monthly payment stream. In other words, a 10 basis point increase in rates off recent record-low levels is sufficient to knock the amount that can be financed down by more than a full percentage point.
Fasten your seat belts, folks!
Mortgage rates jump up, post largest 6-week increase since 2010
The average interest rate on a 30-year fixed mortgage since the start of 2012. (Federal Reserve Bank of St. Louis)
Alex Walsh | awalsh@al.com By Alex Walsh | awalsh@al.com
on June 14, 2013 at 6:22 AM
The average interest rate on a 30-year fixed mortgage is now essentially 4 percent, according to data collected by the Federal Home Loan Mortgage Corp. (a.k.a. “Freddie Mac”).
Interest rates on fixed mortgages have been trending downward since the 1980s, when market conditions were much different than they are today. But in the past six weeks — between May 2 and June 13, that is — rates have climbed by 63 basis points, up from 3.35 percent to 3.98 percent, Freddie Mac said. That increase is the largest since late 2010.
The average interest rate on a 30-year fixed mortgage has been below 4 percent since the start of 2012, outside of one week early on in that year. But if rates were to climb further, the average rate could exceed that mark later this month.
Given that mortgage rates are set to retrace to 2011 levels, is it safe to assume we have already seen the lowest mortgage rates for this cycle?
P.S. The cycle has a period of over fifty years.
“The cycle has a period of over fifty years.”
How many of y’all knew that the length of a long-period interest rate cycle is longer than an effective investing life time, trough to peak and back?
(Raises hand…)
June 14, 2013 in Business
Mortgage rate rise continues
From Wire Reports
WASHINGTON – Fixed U.S. mortgage rates rose for the sixth straight week, putting the average rate on the 30-year loan just shy of 4 percent.
Mortgage buyer Freddie Mac said Thursday that the rate on the 30-year loan increased to 3.98 percent. That’s up from 3.91 percent last week and the highest since April 2012. The average rate was last at 4 percent or higher in March 2012.
The rate on the 15-year loan advanced to 3.10 percent from 3.03 percent. That’s also the highest since April 2012.
Concerns that the Federal Reserve will scale back its bond purchases have pushed rates higher. Still, mortgage rates remain low by historical standards.
…
June 13, 2013, 11:35 A.M. ET
Mortgage Rates Rise For 6th Straight Week, 30-Yr Fixed-Rate At 3.98%
By Michael Aneiro
The bond bear market of the past six weeks continues to impact mortgage rates, with Freddie Mac (FMCC) reporting the average 30-year fixed-rate mortgage rate rose for a sixth straight week to 3.98% from 3.91% a week earlier, according to Freddie’s latest Primary Mortgage Market Survey. The 30-year rate is up sharply during that six-week period from 3.35% in early May.
It the rate’s highest reading in over 14 months, since the week of April 5, 2012, when it also stood at 3.98%. One year ago that rate stood at 3.71%.
The ongoing rise comes amid fears that the Federal Reserve may curtail its bond purchases as economy indicators strengthen, but also amid concerns that a sharp rise in mortgage rates could undercut the housing recovery and damage the Fed’s efforts to kick-start the economy.
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Does anyone have a reasonable conjecture about how much longer this six-week streak of ever-rising mortgage rates is likely to continue before it “tapers” off?
Until the build-up for the next election, maybe?
If pain must be endured by voters then it is best, if you are a politician, that this pain is endured as far from the next election as possible.
“Until the build-up for the next election, maybe?”
That would be the kiss of death for the echo housing bubble. Which might actually be wise for Democratic campaign strategists, as you wouldn’t want the housing market to be in its death throes at a time when Republican politicians are playing the blame game.
June 14, 2013, 10:02 A.M. ET
Mortgage Refinancings Drop By 36% As Bond Yields Surge
By Michael Aneiro
The broad bond sell-off of the past month or so has sent mortgage rates surging to 14-month highs, with an average Freddie Mac (FMCC) 30-year mortgage rate jumping to 3.98% last week from 3.35% in early May and a Mortgage Bankers Association rate rising to 4.15% from 3.59% in early May. That’s raising concerns about the effect on the housing recovery and it’s also caused mortgage refinancings to plunge. Nick Timaros and Andrew R. Johnson report in today’s Wall Street Journal that refinancing applications last week were down 36% from the first week of May, before rates began climbing:
The story points out that some big banks are especially vulnerable to a slowdown, with refinancing accounting for 87% of mortgage business at Bank of America Corp. (BAC) during the first quarter, 90% at Citigroup (C), 77% J.P. Morgan Chase (JPM) and 68% Wells Fargo (WFC).
…
June 13, 2013, 5:11 P.M. ET
Treasuries Gain, Stocks Gain, And Everybody’s Still Confused About The Fed
By Michael Aneiro
Underscoring how nobody cares about anything except the Federal Reserve these days, stocks and bonds had both been gaining in tandem today, until they both rose even more sharply late in the day after Wall Street Journal Fed watcher-in-chief Jon Hilsenrath published an afternoon article saying, basically, that the Fed still isn’t as close to tapering its $85 billion monthly bond purchases as people might think. Quoth Hilsenrath:
Recall that the confusion about the Fed’s intentions really began in earnest last month, in particular following a single Bernanke comment about a possible timetable for tapering that seemed to run counter to his overall message on the subject, and that deepened a broad bond sell-off that’s hit all sorts of risky, high-yielding assets too.
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June 12, 2013, 2:48 P.M. ET
Mortgage-Bond Slide Punishes Metacapital With 6.4% May Loss
By Michael Aneiro
A Bloomberg story out today highlights the latest highflying hedge-fund manager to get undercut by a swing in the very market that was responsible for his rise. Jody Shenn and Kelly Bit report that Deepak Narula navigated the government’s stimulus efforts to become last year’s best-performing hedge fund manager, but his fund is now getting hit hard as the Federal Reserve moves closer to an exit from its Treasury and mortgage-bond purchases:
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“The race to the exits is underway.”
+1 As soon as Bernanke reaches for the QE spigot handle, whoosh!
That’s right! I have no doubt whatsoever that if this correction gets too far out of hand, another tsunami tide of liquidity will wash in to lift all boats another 150 feet or so above mean sea level.
Bernanke knows pump. No way will he waste a chance to pump, pump, pump. He is a market fluffer.
Off-topic: amazing song and video (other than a cinder block, there is no connection to housing):
http://www.youtube.com/watch?v=rVeMiVU77wo
Also, this is why you don’t have affairs with crazy chicks.
another crazy chick video….
http://www.youtube.com/watch?v=ZIdCo_QAz_E
That fiddle lick makes me wish I were motivated enough to develop some fiddling chops. (Also reminds me of the difference between a fiddle and a violin: Fiddle is fun to listen to…)
cool Ive really gotten into zydeco music with the accordion as the lead instrument…..
That’s the first time I have seen a white person holding a cinder block since the early 1990s.
LMFAO. Good one!
Man, and Smithers mad a funny today, too. Good spirits… it must be father’s day or something.
That’s the scariest video I’ve seen in many years. Brings to mind an old girlfriend, too…fortunately she has been out of my life for decades by now.
Invitation Homes ‘For Rent’ signs are popping up all over the place. From the looks of it, they’ve out some money into these houses; many appear to have new roofs/windows.
“Homeowners facing foreclosure should prepare for speedier judgment than they might expect.
Last week, Gov. Rick Scott approved legislation intended to expedite the foreclosure process, which led the Pinellas-Pasco Circuit to make changes that will affect lenders and buyers.
Currently, the average Florida foreclosure case lasts about 900 days. Chief Judge Thomas McGrady said that under the new system, parties should expect a resolution within a year.”
http://www.tampabay.com/news/courts/civil/homeowners-facing-foreclosure-to-feel-effects-of-sped-up-process/2126812
This is a good thing to help clear the market…
June 14, 2013, 3:56 P.M. ET
Detroit To Stop Payments On Certain Muni Debt
By Michael Aneiro
Detroit, in the middle of a painful, protracted effort to avoid insolvency, is eyeing a restructuring plan that could force losses on some unsecured lenders and suspend payments on certain municipal debt. Matthew Dolan reports Friday in the Wall Street Journal:
…
Another Stockton but bigger….Bondholders are the same animal if it be Stockton or Detroit…They say;
“What about the Pensions & Benefits…Do they take a hair cut also” ??
You know what the answer is…The same answer that CalPeers gave Stockton…NO !!
So, Bondholders sue in Detroit…Just like the Bondholders are doing in Stockton…Stay tuned…It will take some time but this is going to play out at the United States Supreme Court…
Q; Do municipal pension have standing over & above all municipal obligations….Do municipal union contracts have standing over & above all municipal obligations ??
That decision will have ramifications beyond what any of us can uderstand…
yet dave the unions wont even offer a solution to end the excess change work rules eliminate OT and comp time, no spiking of benefits…. no cash outs of accumulated sick days.. health insurance for only the pensioner not his family for free.
That wont hurt too many people too much…..but they will fight right into BK court.
And hopefully BK and Supreme court will be so pissssed the final terms will be harsher then had they shown good faith and negotiated ahead of time
The American public is not going to be sympathetic to them this time around.
the final terms will be harsher then had they shown good faith and negotiated ahead of time ??
Could be…We shall see…As far as negotiating in good faith..Hah.
The brotherhood are only brothers until it comes to cuts…Then, its; F my brother…I am in it for me….
San Jose police dept had a recent union vote…Cut 3% of your pay or lay off 65 policemen…Bye-Bye brother…
Bottom line is once they have it they are not giving anything back particularly the pensioners…Now, through new negotiated contracts, you have a two tiered system…One worker on the old rules sitting & working next to and with another worker on the new rules…Both doing the same work but receiving much different benefits & pay…What a wonderful long term working environment…
Dave 3% or 65 layoffs…..bad choice….how about my plan vs 65 layoffs..it wont involve pay cuts on the base pay…just the excess
I get it dj…Point is, the unions rule…We never should have allowed unions in the public sector…A supreme court decision on the matter will have huge ramifications…If they rule against the unions, every municipality will have leverage to re-negotiate deals including pensions…If they rule in favor of the unions, municipal bond rates will go through the roof and be much more difficult to obtain…Only the most credit worthy muni’s will be able to borrow money…What happens to any-town america when the water treatment plant needs major overhaul ??
I don’t see it discussed much in the MSM but once we see the domino effect (Detroit may be next) then the supreme court will need to take up the issue…When they do, you can bet your patutie that it will have national attention…
“What happens to any-town america when the water treatment plant needs major overhaul ??”
Why raise taxes of course. And as Democrats have said forever, raising taxes stimulates the economy. It’s a win-win. We get a new water treatment plant and create jobs. And the best part is only evil rich people have to pay for it.
As opposed to the Republicans who have said forever that borrowing money stimulates the economy and we never have to pay it back. And the best part is, the rich people don’t have to pay any taxes.
“…the rich people don’t have to pay any taxes.”
More accurately, rich people have the means to avoid paying any taxes. Poor working slobs pay through the nose, especially with the end this year of the entitlements tax rollback.
There has never been a better time to be a trust fund baby!
So they are bad people for being asked to cut their income?
Ho would you feel about having your income cut? If you answer anything but “pissed” you are either a liar or never been there. Yet you have no problem thing J6P should take pay cuts.
Remember, government employees PAY TAXES too. The same ones YOU PAY.
We SO have the government we deserve.
“Bondholders sue in Detroit…Just like the Bondholders are doing in Stockton…Stay tuned”
You can’t squeeze blood out of a turnip.
You can’t squeeze blood out of a turnip ??
That is Unless that turnip happens to be unfunded pension liabilities…
Is your point that shedding unfunded liabilities is the next best thing to actually getting paid?
If so, I get your point.
From seemingly out of nowhere …
No warning whatsoever.
No QE3 withdrawal was necessary to spark the race to the exits. All it took to spark another conflagration of panic was for Fed spokesmen to openly acknowledge that at at some point in the indefinite future, QE3 would end.
And QE4 begins?
In due time.
The First Solar Car 1960 - Around for 53 years available to no one.
http://wewillblowyourmind.blogspot.co.uk/2013/05/the-first-solar-car-1960-around-for-53.html
How ’bout, that, huh?
You should take a look at very old Popular Mechanics and Popular Science mags from the 1920-1940s.
We have been ripped off.
Would now be a good time to buy the dip?
I recall thinking so about this time in 2008, and then realizing by late fall that I picked up my pace of stock purchases before the really great buying opportunities materialized.
Unless you diligently scour the MSM financial pages for news of the asset market crash that started six weeks ago, it is easily overlooked.
6:37 pm
Jun 14, 2013
The Intelligent Investor: Why the Markets’ Latest Stumbles Are Good News
By Jason Zweig
If you are an investor and aren’t on the verge of retirement, your fondest wish should be for another whiff of fear that will tip even more assets into the bargain bin.
On May 22, Federal Reserve Chairman Ben Bernanke hinted that the Fed could reduce, or “taper,” the bond-buying program that has nudged markets to record highs.
The ensuing global selloff in stocks and bonds has left some assets (like high-yield bonds) still expensive, some (inflation-protected bonds) mildly attractive and some (international stocks) looking like a steal.
“We’re all so encouraged by the 24/7 news cycle to focus on the short term, it’s too easy to panic when what we thought was attractive gets 10% cheaper,” says Rob Arnott, chairman of Research Affiliates, an investment firm in Newport Beach, Calif., that advises on $150 billion in assets.
Investors should welcome the falling prices that make assets cheaper. Instead, the markets resemble an immense school of fish, shifting from feeding frenzy to reversal in a single silvery flash. Lately, with so many people trading under the influence of cheap money, the customary buy-high/sell-low behavior of the crowd has bordered on the absurd.
In the 20 weeks between Jan. 1 and May 22, nearly $3.4 billion of new money gushed into funds specializing in high-yield bonds, even as the yields on those bonds hit record lows (and as their prices thus went to record highs).
Then the “tapering” fears struck. Between May 23 and this past Wednesday, a mere 15 trading days, people yanked out $7.8 billion—including nearly $1.5 billion on June 7, the largest one-day outflow ever, according to EPFR Global, an investment-research firm.
“Investors who wouldn’t normally have been in high yield at all went into it [in recent months] because yields were so abysmally low everywhere else,” says Martin Fridson, a veteran high-yield analyst and chief executive of FridsonVision, a research firm based in New York. “It seems they all were thinking, ‘As long as I’m the first one out, it’ll be OK.’ But not everybody can get out first.” High-yield bonds are “certainly not a bargain yet,” warns Mr. Fridson, who estimates that yields have to rise another 0.5% to hit fair value.
The same behavior has flooded through funds that invest in emerging-market stocks ($16.2 billion in over 20 weeks, $7.8 billion out in 15 days), emerging-market debt ($3.8 billion in, $999 million out) and Japanese stocks ($13.6 billion in, $437 million out), among other categories.
“As I visit clients world-wide, almost every single investor tells me the same thing,” says Brian Singer, who runs the $145 million William Blair Macro Allocation Fund, which invests in a variety of assets around the world. “The only place they’re seeing any opportunity is in the U.S.”
…
I love the fish analogy:
The Sailfish Frenzy
Try to avoid letting your investing habits turn you into a bait fish.
If a glance to the left and another to the right suggests you are in the middle of a giant bait ball, SWIM STRAIGHT AHEAD AS FAST AS YOU CAN AND GET OUT OF IT, BEFORE THAT ASSEMBLAGE OF SAILFISHES HEADED YOUR DIRECTION WHACKS IT APART!
You need to jump into the Japanese stocked market now.
20% down in a month I believe…
I wouldn’t bet there even with free bernanke money.
I think it only took three weeks to whack 20% off the Nikkei.
And meanwhile, the U.S. headline stock market indices barely budged.
It’s LIFO time for the Nikkei.
Grading Abenomics: After Stock Slide, Japan Economic Reforms Under Scrutiny
By Rana Foroohar
June 14, 2013
Follow @TIMEBusiness
Is Japan now officially in bear market? It’s a question being asked by many investors today, given that the Nikkei closed yesterday 20 percent down from a recent high on May 22nd. The market was up slightly, by 1.9%, on Friday, but mainly off the back of bargain buying. In technical terms, a 20 percent drop is often labeled a bear market. But what’s happened in Japan hasn’t happened in a vacuum – it’s part of a larger central bank inflated money bubble that I’ve been writing about for some time – one that may be starting to pop.
It’s not surprising to me that the Nikkei and the emerging markets have been taking the biggest and fastest correction over the last few days. As savvy emerging market experts like Morgan Stanley’s Ruchir Sharma have been saying for some time, emerging markets have been inflated by central bank money, and given their inherent riskiness, they were always to become volatile at the first sign of a pull back from “quantitative easing,” the Fed’s asset buying strategy.
But Japan is a somewhat different story — the big question there is whether this Nikkei correction (or bear market, as you prefer) heralds the early death of “Abenomics.” That’s the nickname of the policy regime launched last year by Japanese Prime Minister Shinzo Abe, which includes aggressive monetary easing of the kind we’ve already seen from the Federal Reserve in the U.S., as well as promises of major structural changes to the economy, like deregulation of protected sectors, tax reform, trade liberalization, red tape cutting, and a new push for innovation and entrepreneurship. Abe calls his monetary, fiscal and growth reforms the “three arrows” in his quill, referring to an ancient Japanese legend in which three arrows bundled together prove to be stronger than one.
But as in the U.S., the only arrow that has really been deployed is the first — monetary policy. Just as the Fed’s program of asset buying led the Dow to record highs, the announcement that the Bank of Japan would ramp up purchases of Japanese government bonds several weeks ago sent investors into higher-risk assets like stocks, pushing the Nikkei to a six-month rally. But the first sign of Fed tapering sent investors running to the door, and as the old investment adage goes, the last ones in (in this case, investors in Japan’s assets) were the first ones out.
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Yes, but if you put $100 in the Nikkei a year ago, it would have peaked at about $180, and has since come down to $148.
If you put $100 in the Dow a year ago, it would have peaked at about $120 and is now at about $118.
If you put $100 in the S&P a year ago, it would have peaked at about $124 and is now about $121.
You can’t look at the recent price drop in the Nikkei without regard to where it was a year ago.
And meanwhile, the U.S. headline stock market indices barely budged.
Our fall will be one spectacular event for centuries.
You can’t look at the recent price drop in the Nikkei without regard to where it was a year ago.
Honestly how many people can time the market?
Which market?
My point Sad Panda is that the 20% drop in the Nikkei was after a crazy run up of 80%. Implying that the US should have also falled is ignoring the fact that US markets didn’t run up by 80%.
Would now be a good time to buy the dip?
S&P still above 1600, 10-yr Treasuries still near 2%—what dip are you referring to again?
Beat me too it.
“…what dip…”
Got submerging markets?
DJIA 15,070.20 -105.90 -0.70%
S&P 500 1,626.73 -9.63 -0.59%
Nasdaq 3,423.55 -21.81 -0.63%
Emerging Stocks Pare a Fifth Weekly Slide Led by Turkey
By Lyubov Pronina & Julia Leite - Jun 14, 2013 3:04 PM PT
Emerging-market stocks rose and pared a fifth weekly decline, led by Turkey and Thailand, after valuations tumbled to a 10-month low. Brazil’s real posted the biggest drop among developing currencies.
The Borsa Istanbul Stock Exchange National 100 Index rallied 4.6 percent after Prime Minister Recep Tayyip Erdogan met with protesters. Thai’s benchmark index capped the biggest advance since 2011, led by banks, while Russia’s Micex index snapped a three-day drop. Chinese shares in Hong Kong slid for a record 12th day as the nation’s Finance Ministry failed to sell all of the debt offered at an auction. Brazil’s Ibovespa (IBOV) slumped and the real fell on higher-than-forecast inflation.
The MSCI Emerging Markets Index rose 1.1 percent to 953.68, trimming its weekly slump to 2.8 percent. The gauge rebounded after trading yesterday at 9.7 times projected earnings, the lowest level since August, according to data compiled by Bloomberg. Stocks gained even after the International Monetary Fund cut its American growth forecast for 2014 and warned that tapering of Federal Reserve stimulus may be risky if not handled properly.
“Emerging markets are at a pretty big discount,” James Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management, which oversees more than $340 billion, said by phone. “I do think there’s good value and good possibilities over the next couple of years.”
All 10 groups in the emerging-market index rose today as consumer shares had the biggest gains. The broad measure has lost 9.6 percent this year, compared with a 9.4 percent advance in the MSCI World Index of developed-country stocks.
…
The prospect that QE3 may some day end has turned the U.S. economy into the financial equivalent of a black hole, generating an overpowering gravitational force that rapidly sucks the life out of emerging market economies.
Index Last Change % Change
Dow 15,106.51 -69.57 -0.46%
Nasdaq 3,428.59 -16.78 -0.49%
S&P 500 1,630.09 -6.27 -0.38%
Treasuries 2.11 -0.07 -3.04%
What’s Next
Emerging markets in turmoil
By Ben Rooney @CNNMoney
Invest June 12, 2013: 9:38 AM ET
NEW YORK (CNNMoney)
Investors have been fleeing emerging markets as they seek safer havens and higher returns in the developed world.
Stocks, bonds and currencies have been volatile since early May, when investors started to get increasingly worried about when the Federal Reserve might start to pull back on its bond buying program.
The MSCI emerging markets index fund (EEM) has lost nearly 10% in just one month.
The flight from emerging markets accelerated Tuesday after the Bank of Japan left its monetary policies unchanged, dashing hopes for additional stimulus measures, said Kathy Lien, managing director at BK Asset Management.
“We’ve seen a global deleveraging,” she said. “There are questions about central banks becoming more conservative and general concerns about economic growth in Asia.”
Emerging markets have also been hit by weakness in commodity prices and local political issues, noted Capital Economics. Turkey, for example, has been rocked by protests that have sent the nation’s markets into a tailspin.
As investors shy away from risk, the U.S. dollar has rallied against emerging market currencies, such as the Indian rupee, which fell to a record low this week, as well as the Thai bhat, Mexican peso and Brazilian real.
The currency volatility spilled over into stock markets in emerging Asian economies, including Indonesia, Thailand and Malaysia.
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Blue-chip blues
Emerging-market turmoil has turned upside down the assumptions of many of the world’s multinationals. How should they adapt?
Sep 24th 1998 | KUALA LUMPUR, NEW YORK, PARIS AND SAO PAULO
AFTER the oil shocks of the 1970s, it became fashionable for big companies to employ scenario planners who would ask “what if?” questions (usually “What do we do if there is another oil shock?”). With calmer times and markets opening to multinational firms across the world, such macro trend-spotting fell out of favour: the few planners who survived the 1980s were re-engineered out soon afterwards. Now they may stage a comeback.
For many firms the past year has seen the worst scenario plan come gruesomely to life: what happens if your sales in Asia crumble, Russia collapses and commodity prices slump. Oh, and share prices dive, so your normal “I-can’t-think-of anything-else” strategy, buying back shares, no longer looks wise.
So far there is a beguiling appearance of normality: factories are being finished in Thailand, deals concluded in Azerbaijan and share-option schemes haggled over in New York. Western Europe is growing, America still doing well. In the meantime the red ink keeps seeping in. Most blue-chip firms are aware that they hit something some months ago, but as on the Titanic, the band is playing on.
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Market turmoil
Bad vibrations
Violent moves in markets are forcing investors to sell assets
Oct 30th 2008
Illustration by S. Kambayashi
BUNGEE jumps may be exhilarating, but they can also be frightening. They end up with the participants much lower than when they started—and with their safety hanging by a thread.
That has been the experience of investors this year. There have been some phenomenal stockmarket rallies, like the one on October 28th that carried the Dow Jones Industrial Average almost 900 points higher. But there has been a much greater number of dismal dips.
Clearly, bad news about the global economy has played its part. Investors are worried that a widespread recession will prompt corporate bankruptcies (and thus bond defaults) and a sharp fall in profits (hitting equities). The prospect of an economic slowdown has also prompted them to call the end of the commodities bull market (see chart).
But the speed of market movements suggests another factor has been even more important. When investors are in trouble, they sell what they can, not what they would like to. It looks as if they have been dumping a whole range of assets.
Emerging stockmarkets, for example, have lost more than half their value this year, while emerging-government bonds were yielding more than eight percentage points above Treasury bonds, at least until a rally on October 28th. Leveraged loans (debts to finance management buy-outs) are trading at just 70 cents on the dollar.
Who is being forced to sell? One obvious answer is banks that have ended up owning far more risky assets than they would like. Barclays Capital put $970 million of leveraged loans up for sale in October; in the face of disappointing offers, it ended up selling just 30% of the lot. Other banks have been winding down their trading, a big source of revenue earlier this decade, in an attempt to reduce risk.
Another group of sellers is the hedge funds. After a disappointing performance this year, many are facing calls for redemptions from clients and are having to sell assets to raise cash. But their problems also stem from their use of leverage, or borrowed money.
The great deleveraging, as it has become known, has also had a big impact on the currency markets. Many investors have been following a version of the “carry trade”, borrowing money in a low-yielding currency. All they had to do was earn a higher return from assets than the cost of their financing. Since the two big currencies with the lowest yields over the past year have been the dollar and the yen, those were the natural ones to borrow.
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The Fed and emerging markets
The end of the affair
The prospect of less quantitative easing in America has rocked currency and bond markets in the emerging world
Jun 15th 2013 | JOHANNESBURG |From the print edition
THERE are many reasons why a fund manager might want to sell the rand. South Africa’s economy is barely growing. Unemployment, at 25% of the workforce, is on a par with the grimmest parts of the euro zone. The mining industry is beset by labour unrest just as commodity prices are falling. The country’s large trade deficit is a sign that local producers are struggling in vain against foreign competition. The rand has fallen by 16% against the US dollar this year. Only the Syrian pound and Venezuelan bolívar have fared worse.
Yet these local difficulties are not the only reasons for the rand’s slump. South Africa has the financial markets of a rich country: it is easier to buy and sell bonds and stocks there than in most middle-income countries. So the rand is a convenient currency in which speculators can take a position on emerging markets more generally. As the fast-money crowd sense the beginning of the end of loose monetary policy in America, bonds and currencies in emerging markets are the assets they want to sell. The rand is merely the worst-hit in a long list of vulnerable currencies.
In the past month 19 of the 24 emerging-market currencies tracked by Bloomberg have fallen in value against the dollar. The trigger for this sell-off was a remark in May by the chairman of the Federal Reserve, Ben Bernanke, that the Fed’s purchases of bonds using central-bank money might soon tail off. The yield on America’s benchmark ten-year government bond has risen from a low of 1.6% to 2.2%. The prospect of a further rise in yields over time is likely to push up the dollar and draw money back to America from riskier parts of the world. The slump in emerging markets over the past month is in anticipation of such a trend.
It seems a violent response to what was an offhand comment. Mr Bernanke did not suggest an immediate change in policy. The Fed’s bond purchases will continue but perhaps not for long at the present rate of $85 billion a month. An increase by the Fed in short-term interest rates, currently near zero, may still be years away.
Even so, the prospect of a tapering in the Fed’s bond purchases probably marks the start of a long grind upwards in American bond yields to more normal levels. “It won’t be a straight-line affair,” says Kit Juckes of Société Générale. Interest rates will bobble around in search of the right price. The absence until recently of such volatility has made rich-world investors comfortable with exotic punts in emerging-market bonds. As the waters become choppier, they will be far less willing to take such gambles. Tougher capital requirements mean that trading desks of banks are now less keen to buy and hold assets dumped by investors: that will only make bond prices more volatile.
The most vulnerable countries are those that rely on foreign capital to bridge the gap between what they spend and what they earn (see chart 1). South Africa has a biggish current-account deficit relative to GDP: the rand has suffered accordingly. Its standing has also been hurt by weaker commodity prices, in part because of slower growth in China. A handful of other countries, from Chile and Brazil in the emerging world to Australia in the rich world, share the debilitating status of having a commodities bent, a biggish current-account deficit and a wilting currency.
The currencies of some commodity importers are also wobbling. India has a current-account deficit of 5.1% of GDP; the rupee fell to a record low against the dollar this week. Turkey relies on hot money to finance its deficit. The protests in Istanbul are just one more reason to sell the lira.
Is this a panic or something more serious?
…
Here’s an interesting website I happened to run across:
deepcapture.com
Good find.
My sense of puzzlement over MSM articles on real estate seems boundless and endless.
Here is the latest puzzle: Why would a member of the LA Dodgers be interested in owning a sprawling multi-million dollar knifecatcher’s special in Poway, CA? Would the idea be for this to serve as an investment property or a vacation getaway? Or would he live there and commute by helicopter to practice and games?
I simply fail to grasp the practical side of real estate investing at a point when the market is poised to crash again.
EX-BOLT LT’S POWAY HOME STILL ON MARKET
By Lily Leung
12:01 a.m. June 15, 2013 Updated
3:14 p.m. June 14, 2013
LaDainian Tomlinson said goodbye to the Chargers in 2010, but his multimillion-dollar home in Poway is still on the market, he said on a local sports talk show this week.
“It was nice, and I wish someone would buy it,” said Tomlinson, who phoned in to XX 1090’s “Scott and B.R. Show” from his current home in Westlake, Texas, in the Dallas-Fort Worth region.
LT’s property in Poway first hit the market in fall 2011 with an asking price of $5.2 million. It was re-listed in April at $3.75 million, according to the MLS.
He bought the property in 2004 for $3.5 million, public records show. The home, which sits on two parcels, features five bedrooms, 5 ½ bathrooms and a plethora of upgrades.
“Seller spared no expense in creating this special private atmosphere ideal for entertaining and family living,” the listing says. “Home features virtually all the bells and whistles.”
Those extras include a wet bar, sauna, gourmet kitchen, game room, private pool and spa, and outdoor barbecue.
A full-sized basketball court/tennis court sits on an otherwise unimproved second lot, which can be developed by the buyer or left as is.
The discussion of Tomlinson’s home started when radio show host Scott Kaplan asked how much home one could get in Westlake, where LT resides now. The former Charger said his current home is “very comparable” to his property in Poway, which he revealed on the show is still on the market.
Tomlinson, a five-time Pro Bowler, is not giving up hope on selling his home. He said there’s a notable Dodgers player interested in buying, but would not name names.
“Hopefully that happens,” he said.
…
I think he bought Terry Bradshaw’s old house in Westlake.
What was that asking price again?
Fascinating!
Stunning San Diego Estate
Listing ID #CA146029
Poway,CA
Asking Price: $5,210,000
Status: Active
Type: Single Family
Bedrooms: 5
Full/Half Baths: 5/1
Approx. Living Area: 9,564 sq. ft.
Approx. Lot Size: 578,477 sq. ft.
Garage Spaces: 6
Swimming Pool: Yes
Taxes: $40,398
Year Built: 2004
County: San Diego
So is the asking price $5,210,000 or $3,750,000?
And do the Realtors™ really expect to find a buyer willing to pay the higher price when the MLS listing is for over a million dollars less!?
Notice how Zillow “estimates” the property might sell for asking price, while eppraisal says “non.”
18755 Heritage Dr Poway, CA 92064
$3,750,000
HOA Dues: $1,090/mo.
5 Beds
5.5 Baths
9,565 Sq. Ft.
$392 / Sq. Ft.
Built: 2004 Lot Size: 13.28 Acres On Redfin: 68 days
Status: Active
Highly upgraded home on two over-sized lots. Seller spared no expense in creating this special private atmosphere ideal for entertaining and family living. Home features virtually all the bells and whistles, including a gourmet kitchen, media room, game room, wet bar, formal living and dining, sauna, his and hers walk in closets, office. Outside is a resort quality private pool and spa, BBQ, tv’s and plenty of room for lounging. 2nd parcel is (See Supplement . .. .)
is basically unimproved with the exception of a full size basketball court/tennis court with professional night lighting and some landscaping. There are two legal parcels and the HOA fees reflect both dues that are required for both lots. New owner can build another home and sell off OR keep as is and enjoy the privacy!
HOA Dues $1,090/month
Style Mediterranean/Spanish
View Evening Lights, Mountains/Hills
County
Property Type Residential, Detached
Stories 1
Community Heritage
MLS# 130017489
Property History for 18755 Heritage Dr
Date Event Price Appreciation Source
Listed (Active)
$3,750,000 — SANDICOR #130017489
Delisted (Expired)
— — SANDICOR #110023904
Price Changed
* — SANDICOR #110023904
Listed (Active)
* — SANDICOR #110023904
Sold (Public Records)
$3,500,000 — Public Records
* Price is not available or MLS listing is off market.
Zillow:
$3,658,321 Est.
$2,194,993 Low
$4,499,735 High
eppraisal:
$2,861,844 Est.
$2,432,567 Low
$3,291,121 High
In case you are shopping for a $1m+ home in San Diego County and LT’s isn’t your style, there are another 1,418 homes on that price range currently listed on the MLS from which to choose, representing 29%+ of total San Diego County listings!
And not a buyer in sight.
I don’t follow that segment of the market closely, but my impression is that homes in the $1m+ price range are sitting on the market for years (like LT’s) and if they ever eventually do sell, it is at a price far below the owner’s initial wishing price.
What is the biggest difference between conservatives and liberals?
Conservatives are more than happy to live under the same laws they expect everyone else to live under.
Liberals expect to be exempted from the socialism they want everyone else to live under.
They destroy the public schools but send their kids to private schools.
They destroy neighborhoods with Section 8 housing but live in gated communities.
They want to ban guns except for protecting themselves.
They want obamacare for everyone except themselves.
—————————
Democratic Congressman: ‘Not Fair’ To Subject Congress To Obamacare Just Like Everyone Else
Forbes | June 13, 2013 | Robert Book
When the Patient Protection and Affordable Care Act (“Obamacare”) was being debated, proponents were accused of saddling Americans with inferior and expensive health care while keeping generous coverage for themselves at taxpayer expense. To rebut that allegation and build confidence in the bill, a provision was added mandating that members of Congress – and their staff members – get there coverage through the new exchange system the bill set up. Now that the time to sign up for exchange coverage is nearing, a Democratic member, Rep. John Larson (D., Conn.), is saying that “this is simply not fair” – as key staff members head for the exits to avoid Obamacare.
Politico reports that “many on Capitol Hill fear it could lead to a brain drain” and notes that “[t]he problem is far more acute in the House, where lawmakers and aides are generally younger and less wealthy.”
I’m liking it more already.
It simply means that Congressional staffers will in the future have to be independently wealthy or have another revenue stream.
I am sure that a free market solution will present its self.
OR they will actually be in the same boat as the average American and will be OK with equivalent coverage. It would be nice to see some people like that get elected because their betters don’t want to deal with the health care that everybody else has to use.
What is the biggest difference between conservatives and liberals?
About 11 IQ points?
Why Liberals Are More Intelligent Than Conservatives:
Liberals think they’re more intelligent than conservatives because they are
http://www.psychologytoday.com/blog/the-scientific-fundamentalist/201003/why-liberals-are-more-intelligent-conservatives
“……more intelligent children are more likely to grow up to be liberals than less intelligent children. For example, among the American sample, those who identify themselves as “very liberal” in early adulthood have a mean childhood IQ of 106.4, whereas those who identify themselves as “very conservative” in early adulthood have a mean childhood IQ of 94.8.”
“…..more intelligent individuals are more likely to espouse the value of liberalism than less intelligent individuals, possibly because liberalism is evolutionarily novel and conservatism is evolutionarily familiar.”
But libertarians are far more intelligent than modern liberals (who are very conservative when it comes to conserving big government).
They are not liberals nor progressives. Let’s call them what they are, social democrats.
But libertarians are far more intelligent than modern liberals
Obviously not all of them.
Go show one of these “intelligent children” a video of partial birth abortion. You know the ones, with only the baby’s body is out of the womb and where the “doctor” cuts open the babies head (with the arms and legs kicking widely) and then proceeds to suck out the baby’s brain. The legs and arms slowly stops moving and then a baby with a collapsed head is then delivered only to be thrown into a trash can.
Then ask the “intelligent child” that her mommy thinks what you just saw is a US Constitutional Right.
Now ask the child to explain the difference between being smart and having wisdom.
Liberals are a funny bunch. They never think what they vote for and support will actually happen to THEM.
Or you could show them a small child killed by a Drone and explain that “collateral damage” is legal.
No, nannerz, I DON’T “know the ones”. Why don’t you give us a link to a “partial-birth abortion” (whatever that’s supposed to mean) filmed in the US with an actual fatally-malformed fetus instead of a plastic baby doll, huh? Late terminations amount to less than .02 percent of all abortions performed in the US, and are almost exclusively medically indicated - by law.
Or maybe you’d prefer to see some dead mothers killed by their toxic pregnancies?
“…those who identify themselves as “very liberal” in early adulthood have a mean childhood IQ of 106.4, whereas those who identify themselves as “very conservative” in early adulthood have a mean childhood IQ of 94.8.”
Young Republicans are of below average intelligence?
Big shocker there!
“Young Republicans are of below average intelligence?”
I wouldn’t go beating that drum, I have known some pretty fuqin dumb smart people.
“You know, everybody’s ignorant, just on different subjects.”
― Will Rogers
“You know, everybody’s ignorant, just on different subjects.”
Nah. Some people have mastered the art of bull$hitting in every subject.
I was really just trying to yank 2banana’s chain; I neither know nor care whether Repugnacants are smarter or dumber than Dumbocrats.
Mine is above 120. Certainly not a liberal in the modern sense.
But stopped believing in he “flying spaghetti monster” at age seven. Religion is for dunces for sure. Maybe that’s why the IQ difference.
Note the IQ results do not measure emotional intelligence or social intelligence. If you cannot get along with people, no matter if you are a genius, you won’t get anywhere.
How dare John Larson (D., Conn.) question his betters! What? Oh, he thought he was one of the betters. Well that sucks for him.
“Politico reports that “many on Capitol Hill fear it could lead to a brain drain”
That sounds like “high levels of compensation are needed to attract and keep qualified employees” to me.
Report: Mgrs. at Fannie, Freddie earned $200K
By MARCY GORDON— Dec. 10 4:17 PM EST
By: MARCY GORDON (AP)
WASHINGTONCopyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
38.8951-77.0364
WASHINGTON (AP) — A government report finds median pay for nearly 2,000 senior managers at government-controlled Fannie Mae and Freddie Mac exceeded $200,000 last year.
The Federal Housing Finance Agency, which oversees the two mortgage giants, also did an inadequate job monitoring pay, according to the report released Monday from the inspector general for the FHFA.
The report also says the top 333 of those managers are vice presidents who had median pay of $388,000.
The agency and the two companies have said that the relatively high levels of compensation are needed to attract and keep qualified employees
http://bigstory.ap.org/article/report-mgrs-fannie-freddie-earned-200k - 55k
Wait a sec. If we don’t pay them at this level, the “qualified employees” who needed a bailout to keep their jobs in existence would walk?
Good god, we are an entitled lot.
“Wait a sec. If we don’t pay them at this level, the “qualified employees” who needed a bailout to keep their jobs in existence would walk?”
Yes, and if the people running our $ trillion a year deficit don’t get to keep their gold plated insurance “many on Capitol Hill fear it could lead to a brain drain”.
“Conservatives are more than happy to live under the same laws they expect everyone else to live under.”
No they aren’t.
They are also more than happy to take away civil rights and sell us out to communists in the name of “business”.
And liberals are ALL professional liars.
So are republicans & conservatives. All politicians are liars.
“Rep. John Larson (D., Conn.), is saying that “this is simply not fair” – as key staff members head for the exits to avoid Obamacare.”
Pelosi: “We Have to Pass the Bill So That You Can Find Out What Is In It”
http://www.youtube.com/watch?v=hV-05TLiiLU - 220k -
Perhaps corporate American could “sponsor” a few staff members for each member of Congress?
“What is the biggest difference between conservatives and liberals?”
Conservatives constantly try to push their political agenda on the HBB; liberals don’t.
Thats very funny. To liberals, liberalism is a religion, coming above all
else. To say that they don’t push their agenda on this blog or everywhere else on a daily basis is ridiculous.
This is a blog about the housing bubble.
Ah, and the hits keep coming:
“About 270,000 Florida properties could face huge flood insurance rate hikes. That’s three times more than the next most-affected state, New Jersey.
The bulls-eye is on Pinellas County, which leads all counties across the nation with almost 51,000 affected properties, roughly an eighth of its homes and businesses.”
http://www.tampabay.com/news/business/banking/premiums-rising-for-national-flood-program-though-florida-pales-in-payouts/2126888
Bottomline democrats are fraudsters, liars and cheaters. The country is in good hands. Not an endorsement of republican party. Just stating the facts from ABCnews.com. Little things like this tells a lot about people you are dealing with. Why do we even wonder with all the scandals and frauds that’s been going on?
Democratic Convention Organizers Claim $500K of Lost Electronics
A reportedly stolen 13-inch MacBook Pro laptop? $75,537. The price listed on the Apple website is $1,199. A lost iPhone? $30,503. A lost Blackberry? $54,250.
My two oldest kids have made some bad decisions that have really pissed me off and caused a lot of pain in our family. They are both getting their act together but have to overcome the opportunities they blew just like their father had to.
Besides the housing BS and the economy it has been a tough 5 or 6 years for our family but we all managed to get through it. Every once in a while I see or hear something that reminds me how lucky we are.
Soul Asylum - Runaway Train - YouTube
http://www.youtube.com/watch?v=NRtvqT_wMeY - 266k
Like I said above, every once in a while I see or hear something that reminds me how lucky we are.
$2,500 bank fraud suspect blames ‘Ma,’ and cross dresser named Serenity for leading her into crime
By Julius Whigham II
Palm Beach Post Staff Writer
Posted: 1:16 p.m. Friday, June 14, 2013
PALM BEACH GARDENS —
As Virginia Holt was confronted by police officers while leaving a bank Wednesday afternoon, she quickly acknowledged her alleged crime, police said.
“They made me do it, I was leaving because I knew it was wrong,” Holt allegedly told officers who were responding to a complaint that she tried to cash a fraudulent check.
Police arrested Holt, 36, on allegations of identity theft, uttering a forged check and grand theft. She remained in custody at the Palm Beach County Jail late Thursday in lieu of $13,500 bond.
The arrest report lists Howley, Pa., as Holt’s place of residence, but she told officers she is homeless.
According to the arrest report, Holt tried to used the identification of a Vero Beach woman, whose purse was stolen in March during a car burglary in Port St. Lucie. Holt allegedly walked into the Seacoast Bank on PGA Boulevard and tried to cash a check using the other woman’s name.
Holt told investigators that two people she met through a friend told her she could make $400 if she went to the bank and cashed the check She was given the Vero Beach woman’s driver license and instructions on what to do when she entered the bank, the arrest report aid.
At about 2:15 p.m. Wednesday she allegedly went into the bank and requested a savings withdrawal slip. Holt was given a generic blank check which she allegedly filled out for $2,500.
A bank teller told police the account number Holt gave did not match the bank’s records. When the teller searched for the account by name, she discovered it had been flagged for possible criminal activity.
Holt started to leave the bank when the teller pointed her out to arriving officers.
While being questioned, Holt told police that a woman and two men were waiting in a car for her at the Gardens Mall. Police searched the mall parking lot but did not find the car.
Holt reportedly told officers that the stolen license had been given to her by a woman named “Ma” and a man dressed as a woman named “Serenity.”
http://www.palmbeachpost.com/news/news/local/2500-bank-fraud-suspect-blames-ma-and-cross-dresse/nYLTs/ - 81k -