The Housing Bubble

I don’t have a link, but it certainly has been reported many, many times that people who could have qualified for regular loans for a particular purchase, were pushed into subprime product because the mortgage brokers got higher fees for those loans. Since we are talking about a loan for a particular purchase, there is no reason to believe that the subprime one they got would have been higher than the prime one they could have qualified for. What I have heard about was mostly among demographic groups that were likely to be the first house buyers in their families and who therefore didn’t have access to family advice about how to apply for a mortgage.

The problem with finding documentation is that the folks who could have qualified for prime loans for their purchases were only a portion of the people who ended up in subprime. Plenty of other people who ended up in subprime either couldn’t have qualified for a prime loan at all, or could only have qualified for a much smaller one based on traditional underwriting standards.

If you are looking for good data on what the percentages were for each subgroup, you are going to have to look into the academic studies. Journalists work off anecdotes. Unless they are reporting about an academic study or an investigation by regulators, they don’t have access to work analyzing statistically valid samples.

“I’m having an argument with some fellow that inisists that in Housing Bubble 1.0, homeowners who were QUALIFIED for prime mortgages were duped into taking subprime loans.”

The fellow you are having an argument is correct. Loan brokers would maybe offer a commission-free deal to the mark by convincing him to take a what-turned-out-to-be-a-subprime-rate and then make a few thousand dollars on the backside by selling this subprime rate priced loan to somebody else at a prime rate price.

I know of several instances of this happening. I even tried to point this out to the mark in one instance but the mark didn’t care because, from his point of view, it was only just a point or so on the loan and he would more than make it up because real estate always goes up, etc.

I have excellent credit, and when I was shopping for a mortgage I was bombarded with alternative mortgage products until I said that I wanted a “conforming” loan or nothing. The higher fees for alternative products usually meant no early payment options, and/or penalties were applied if you refinanced. The commission junkies got greedy.

How do these these investigators know that these borrowers “qualified for prime loans”? I’m guessing that the paperwork for a prime loan will have all the necessary documentation, but wouldn’t the bank only keep whatever documentation is required for a subprime loan, i.e. basically nothing? I know I discard unnecessary paperwork in my files.

Yes it is really hard to get hard statistics on some of these claims. Words like “some,” “many,” “often” are all over the place. Really horrible business/financial reporting out there.

Chili:

“homeowners who were QUALIFIED for prime mortgages were duped into taking subprime loans.”

Yes, and the same thing is happening now. Perfectly qualified people are still being “duped” into 103% financing. If the price momentum continues, then more qualified people will be “duped” into neg-am ARMS.

I think your opponent is under the impression that lending standards have gotten sane again, so therefore this can’t possibly by a bubble (or dead-cat bounce, or anything of the sort). They have not. When 10% down is required for first-time buyers, and movers-up get the rate discount with their 20% down, THEN we can say that lending is back to normal. Until then, no comparison of historical lending standards is going to justify house prices. The only thing that can justify house prices is rents. Even then, it may be dubious.

China’s Credit Crunch Felt Across Financial Markets
June 21, 2013 4:00 AM
3 min 25 sec

The lending rate between Chinese banks spiked dramatically on Thursday, creating a credit crunch. Renee Montagne talks to NPR Shanghai correspondent Frank Langfitt about the turbulence in China’s banking system, and how authorities in Beijing are responding.

21 June 2013 Last updated at 03:43 ET

Robert Peston,
Business editor

BBC News - China: credit crunch or worse?

What is the significance of the recent turmoil in China’s money markets, the sharp reduction in the flow of credit between banks and the rising cost of loans between banks?

Its trigger has been a tightening of credit provision to the financial system by the Chinese central bank, the People’s Bank of China.

But its more fundamental cause is the perception - apparently shared by the central bank - that Chinese banks and so-called shadow banks have lent far too much, too recklessly over the past five years, and that a reckoning may loom.

There are two implications.

First that the Chinese authorities have lost one of their most important economic levers, which they have deployed with powerful effect since the 2008 global financial crisis - namely to create vast amounts of credit to fund investment, and stimulate economic growth to offset deflationary forces imported from the rest of the world.

Or to put it another way, the widespread recognition that excessive amounts of debt have been accumulated by speculators, property developers and local governments, inter alia, makes it much riskier for the central bank to continue the recent policy of stoking up an investment boom each time there is a blip in China’s growth.

To do so in future would risk China becoming dangerously like Japan in the late 1980s - an economy in which a massive investment bubble deflates to stymie growth for a generation.
…

The Rise of China
China’s credit squeeze spooks markets
By Mark Thompson @MarkThompsonCNN
June 21, 2013: 10:19 AM ET
China is grappling with the challenge of pricking real-estate and credit bubbles and avoiding a hard landing for the economy at the same time.
LONDON (CNNMoney)

China is facing a tricky problem with its economy — and that’s making the rest of the world skittish.

In its bid to control surging real estate prices and a head off a credit bubble, the Chinese government could end up sparking a credit crunch and slow economic growth more than expected.

And as seen this week, concerns about the world’s second-biggest economy can rattle investors all over.

The People’s Bank of China, which maintains tight control over the banking system, has been taking a tough line with Chinese lenders. It refused to inject cash into the financial system earlier this week despite rocketing short-term borrowing costs and evidence that the economy is slowing.

Growth in China slipped to 7.8% last year. The government’s target for this year is 7.5%. But the risk of a disappointment is rising and with it the prospects of a weaker-than-expected recovery in the global economy.

HSBC, which cut its China forecast to 7.4% this week, said it believed Beijing would not act to stimulate the economy unless growth was heading to 7%.

“We believe markets will worry about the slowdown, but take time to get enthusiastic about the prospects for reform,” noted HSBC strategists Garry Evans and Herald van der Linde, downgrading Chinese equities to neutral from overweight.

The Shanghai Composite and Hong Kong’s Hang Seng both closed about 0.5% weaker Friday and have lost 8.6% and 10.6% respectively since the start of the year, compared with gains of about 11% on U.S. stocks.
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18 HRs agoWorld
China Faces Fallout of Self-Made Cash Crisis
Central Bank’s Attack on Informal Lenders Criticized as Too Aggressive; Borrowing Costs Ease Somewhat but Remain High

China’s cash shortages eased a bit Friday, but the central bank’s campaign to tame runaway credit may be too aggressive, critics say.

By Bob Davis, Shen Hong

China’s central bank is wrestling with a liquidity crunch of its own creation.

A cash shortage that has sent short-term interest rates as high as 25% earlier this week and alarmed the world’s markets, eased a bit Friday. Traders said the People’s Bank of China, may have asked big state banks to refrain from hoarding cash and release more funds to ease the liquidity squeeze. But the top priority for the central bank, acting on instructions from China’s political leadership, continues to be taming runaway informal lending.

China’s campaign to tame runaway credit may be too aggressive, critics say, creating as many problems as those it is trying to solve and raising the risk that the world’s second-largest economy will face continuing turmoil and slow growth.

If its action further reduces growth in China, the effects will ripple around the world to commodity suppliers in Asia, Latin America and Africa, to manufacturers and high-tech firms in Europe and the US.

The PBOC, which rarely explains its actions, hasn’t responded to repeated requests to comment

Its squeeze on China’s liquidity comes at moment of market volatility caused, at least in part, by the Bank of Japan’s aggressive monetary easing and the U.S. Federal Reserve’s talk of beginning to take its foot off the monetary accelerator.

Speculation the Chinese central bank may be taking steps to ease the cash crunch helped lower benchmark borrowing costs in China’s interbank market, where banks led to each other. The seven-day repurchase agreement rate was 9.29% on a weighted-average basis at midday Friday, down from 11.62% at Thursday’s close.

Still, the rate remains far above its typical 2%-3% range, and analysts say authorities may need to take forceful action to restore funding conditions. The interbank rate could still jump this coming week as lenders rush to raise money to meet urgent quarter-end funding needs.

With interbank interest rates remaining at elevated levels, banks’ funding costs are elevated too. “If the banks pass on these charges in higher lending rates, it is effectively monetary tightening,” said Haibin Zhu, a China economist at J.P. Morgan. “That would put further pressure” on an already slowing economy.

China’s GDP grew 7.7% in the first quarter from a year earlier, one of its worst performances since the global financial crisis, and was widely expected to slow further even before the central bank started pushing interbank rates higher in early June by withholding liquidity. It was a calculated move: Leaders knew growth could slow further as higher interest rates are bound to reduce lending, at least in the short run.

The PBOC hasn’t said why it is squeezing the market, how long it will continue the policy or how it measures success or failure. That isn’t unusual in the opaque Chinese system. Chinese officials were largely silent, too, when credit surged in the third quarter of last year, which temporarily boosted growth a bit.

The PBOC, unlike central banks in developed countries, isn’t independent. It reports to both the government’s top body, the State Council, and the Communist Party’s top body, the Politburo Standing Committee. On Wednesday, the State Council pledged it would “firmly guard” against “systemic risks” and make sure credit gets channeled into productive uses. In practice, say China analysts, that means that PBOC will continue to shut off funds as a way to reduce the surge of lending by what are known as shadow banks—an assortment of trust companies, leasing firms, pawnshops and other informal lenders—that sometimes fund projects that can’t cut it commercially and rely on political bailouts to get paid back.
…

Stocks fall for second straight week
By Maureen Farrell @Maureenmfarrell June 21, 2013: 4:15 PM ET
NEW YORK (CNNMoney)

Thanks a lot, Ben Bernanke!

The Federal Reserve chairman clearly spooked the market this week. Simply hinting that the Fed might wind down its stimulus program later this year was enough to lead to another week of losses.

The three major U.S. stock market indexes ended the week down between 1.8% and 2.1%.

But the Dow Jones Industrial Average and the S&P 500 finished Friday up 0.3%, after spending part of the day down. The Nasdaq closed down 0.2%.

On Wednesday and Thursday, the Dow shed more than 550 points, and stocks stayed on rocky ground Friday.

Bernanke’s words have kept bond yields jumping. The 10-year Treasury yield hit nearly 2.54% Friday.

Investors have been bailing out of bonds and sending yields higher over the past month amid speculation that the Fed will soon taper its monthly bond purchases, known as quantitative easing.

Even after this week’s sell-off, stocks are still way up this year. The Dow, S&P 500 and Nasdaq have gained between 11% and 13% since the start of January.

The Fed has been a major driver of the bull market over the past few months as it has injected liquidity into the markets. Traders say the coming shift in monetary policy will mean even more volatility in the months ahead.
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Fed Seen by Economists Trimming QE in September, 2014 End
By Joshua Zumbrun & Catarina Saraiva - Jun 21, 2013 4:12 AM PT

The Federal Reserve (TREFTOTL) will trim its monthly bond purchases to $65 billion in September and end buying in June 2014, according to the plurality of estimates by economists in a Bloomberg survey.

The survey of 54 economists was conducted June 19-20, following Chairman Ben S. Bernanke’s press conference, in which he mapped out a timetable for ending one of the most aggressive easing strategies in Fed history. His remarks prompted economists to predict a faster reduction in bond purchases from $85 billion per month: 44 percent of economists see a tapering in September compared with 27 percent in a June 4-5 survey.

“It’s a shot heard round the world for global investors — a reminder that QE is in fact going to end one day,” said Chris Rupkey, the chief financial economist for Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, referring to a policy known as quantitative easing. “One thing that would help them wind down quicker would be confirmation the unemployment rate is going to come down quicker.” The jobless rate in May was 7.6 percent.
…

SHOULD INVESTORS FEAR A BIG CORRECTION IN THE STOCK AND BOND MARKETS? SHOULD THEY BANK THEIR PROFITS AND EXIT NOW?
By Roger Showley
12:01 a.m. June 16, 2013 Updated
5:43 p.m. June 14, 2013

Yes: There is a great deal of uncertainty in financial markets today. These conditions have led investors to fear stocks and loathe bonds. While waiting for the economy to make a decisive move, investor decisions are being influenced by the actions of the Federal Reserve; for example, Fed policies are pushing investors into stocks whether they want to be there or not. Investors should be fearful and bank profits regularly. But withdrawing from the market would likely mean missing out on further stock market returns courtesy of Fed policy.
…
Last week’s question: Are you worried that housing is headed for another bubble — a steep rise, then a crash?

UT-San Diego Online poll results:

YES: 64%

NO: 36%

June 21, 2013, 6:01 a.m. EDT
How to change your bond strategy
Commentary: The correction is here, this time, it’s for real
By Howard Gold

If you’ve kept your ears open, you may have heard a huge rumbling, like the earth shaking or a redwood falling in the forest.

It wasn’t a natural disaster but the sound of the bond market cracking, heralding the long-awaited correction — or end — of a three-decade-long bull market.

Many have predicted it, and they have been either “early” or wrong. But this time there are signs it’s for real.

1. Federal Reserve Chairman Ben Bernanke suggested Wednesday the Fed may start unwinding its extraordinary bond buying program later this year, causing stock and bond prices to plunge.

2. Some of the hottest, riskiest sectors of the bond market have sold off big lately.

3. Investors who have poured money into bond funds for years are now bailing out in earnest.

The selloff in risky assets is the most telling. Last September I named long U.S. Treasurys, Treasury Inflation Protected Securities, and high-yield bonds as the market’s three most overvalued assets. I could easily have added emerging-market bonds to that list.
…

bernakes stress test. I guess if the market tanks they go back to more printing?

I think anytime soon, it will end, and September indices will be higher than the highs made so far this year.

Got market jitters?

ECONOMY
June 21, 2013, 8:41 p.m. ET
Fed Is Toiling in Vain to Calm Jittery Markets
By JON HILSENRATH

Since Fed Chairman Ben Bernanke said the central bank expects to curb its big bond-buying program later this year, markets tumbled. But, a close look at his comments and Fed official’s interest-rate projections show the Fed took several steps aimed at sending the opposite signal. Jon Hilsenrath reports.

The financial markets’ violent movements this week underscore the immense challenge the Federal Reserve faces as it eyes an eventual end to its $85 billion-a-month bond-buying program.

After trying for years to lift a postcrisis economy with a concoction of untested easy-money programs, the Fed delivered a largely uplifting message Wednesday: The economy might be getting strong enough to stand on its own with less support.

The market reacted as an addict might to the threat of losing drugs—it broke into shakes and a cold sweat.

Treasurys tumbled, the yield on the 10-year note seeing its steepest weekly jump in a decade. Five- and seven-year bonds, the focus of much of the Fed’s bond buying, saw even more violent selling. Investors in high-yield and municipal bonds also rushed for the exits.

The Standard & Poor’s 500-stock index fell 2.1%. Emerging markets, where jitters over the Fed mixed with questions about the health of China’s economy and financial system, were hit harder. The MSCI emerging markets index fell 4.7%, its biggest weekly drop since May 2012. Gold fell to a nearly three-year low before recovering slightly on Friday.

The market reaction presents the Fed with new questions that will only be answered in the months ahead: Are the economy and markets really healthy enough now to stand on their own? Might the prospect of withdrawing stimulus undermine the recovery the Fed has been struggling for years to engineer? Are its efforts to clarify its thinking helping or hurting?

The central bank was largely behind the market drama. Seeing a stronger economy in the months ahead, Chairman Ben Bernanke on Wednesday set out a tentative timetable for the Fed’s pullback from its latest bond-buying program—launched last September to push down long-term interest rates, buoy asset prices and encourage economic growth. In a news conference after a two-day policy meeting, he said the Fed could start reducing its monthly bond purchases later this year and end them altogether by mid-2014, but only if the economy picks up as the Fed expects.
…

Apparently MSM financial writers completely missed the selloff in long-term Treasurys that started on May 2nd, instead incorrectly dating the correction to something Ben Bernanke said on May 22nd.

It’s appalling how lazy journalists are these days, as the information on daily changes in Treasury bond yields is publicly available on an easily-found web site.

Price of Gold Plunged, Panic Deepens on World Financial Markets
By Andre Damon
Global Research, June 21, 2013
World Socialist Web Site
Theme: Global Economy

Global stocks plunged Thursday in the biggest one-day sell-off so far this year, after Federal Reserve Chairman Ben Bernanke said the US central bank might consider paring back its cash infusions into the financial markets within the next six months.

The panic in stock and bond markets sparked by the remarks of Bernanke, who on Wednesday suggested the Fed might start winding down its $85 billion per month in asset purchases, was compounded by the release of data on Thursday showing that Chinese manufacturing activity hit its lowest level in nine months.

These developments point to two fundamental facts about the current economic situation: the continuing slump in the real economy and the extreme dependence of global financial markets on virtually free credit from the Federal Reserve and other central banks.

In the United States, the Dow Jones Industrial Average fell 353 points, or 2.34 percent, in its biggest drop since November 2011. This followed a 206 point drop on Wednesday. The Standard & Poor’s 500 index fell by 2.5 percent, and the Nasdaq Composite Index fell by 2.3 percent. All ten sectors of the S&P 500 fell by more than two percent.

The drop in US financial markets followed a panicky sell-off in Europe and Asia earlier in the day. The United Kingdom’s FTSE 100 index lost 2.98 percent and the German Dax lost 3.28 percent. In Asia, Hong Kong’s Hang Seng index dropped by 2.88 percent and Japan’s Nikkei fell by 1.1 percent.

Asian markets declined further at their opening Friday morning, with the Nikkei down by 2 percent, the Hang Seng down by 1.75 percent, and the Australian All Ordinaries index down by 0.70 percent in early trading.

All major commodities were hit by Thursday’s sell-off, with gold futures dropping below $1,300 per ounce, the lowest level in two-and-a-half years. Silver dropped by 9.7 percent during the day before recovering slightly, hitting its lowest level since 2010. Prior to Thursday’s sell-off, gold prices were already down by 18 percent, in what may become the first yearly decline in the value of gold since 2000.

Every asset class, including bonds of every duration and quality, fell sharply. Yields on ten-year US Treasury notes went as high as 2.47 percent during the day, up from 1.61 percent in May, before retreating as the stock sell-off intensified.

Emerging market currencies continued to plunge against the dollar. The Indian rupee fell 2 percent to a new low, and the Turkish lira fell 1.8 percent. The US dollar rose more than one percent against the Korean, Russian, Polish and South American currencies.

A preliminary reading of HSBC’s Purchasing Managers’ Index (PMI) for China, a measure of manufacturing activity, fell to 48.3 this month, down from 49.2 in May. This was the lowest reading in nine months. The Chinese economy slowed to a growth rate of 7.7 percent in the first quarter and is expected to continue slowing in the second.

The Markit Flash euro zone PMI, also released Thursday, while slightly improved, nevertheless indicates that the European economy remains stagnant.

The economic slowdown and bond sell-off have sparked a credit crunch in China, where overnight inter-bank lending rates hit 13.1 percent, the highest on record and up from the previous day by 5.98 percentage points.

Data in the United States was little better. The day after Fed Chairman Bernanke reported an improved outlook for the US economy and the jobs market, the Labor Department said initial applications for unemployment benefits rose unexpectedly last week by 18,000, to 354,000.

The plunging bond market hit junk bonds especially hard, raising the prospect of troubled companies becoming insolvent. The iShares iBoxx High Yld Corp Bond, the largest junk bond fund, fell 1.5 percent.

“All these people who lined up to buy high-yield bonds, only looking to get that extra yield and not paying much attention to the credit quality of these companies, are now just trying to get out,” Adrian Miller of GMP Securities told the Financial Times .

Bond prices have been plunging since May 22, when Bernanke indicated in congressional testimony that the Fed might slow asset purchases “in the next few meetings” if economic conditions continued to improve.
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A city or county can opt out of that requirement but you know that isn’t going to happen in forest fire country where Charlie works ??

Fire country or not they won’t opt out…..Recent Fire Sprinkler plan check fee I paid was $1500. that went right to the Fire Department…Design was another $500…Permit was $225,,,Installation is $4200….

So, times that cost by every new residential structure built in the entire state of California…Thats what type of laws that are brain trust in Sacramento pass…What organization do you think Lobbied for it…

Right from the horses mouth, RAL you don’t know what you are talking about, go do a take off and develop a bid estimate and we will all then worship you again.

http://osfm.fire.ca.gov/codedevelopment/residentialsprinklerandcacodes.php

The California Building Standards Commission approved the State Fire Marshal’s Building, Fire and Residential Code adoption packages for the 2010 California Building Standards Codes at the hearing on January 12, 2010. The 2010 California Building Standards Codes published July 1, 2010, with an effective date of January 1, 2011. A key component in the 2010 code adoption is the addition of residential fire sprinklers in all new one-and two-family dwellings and townhouse construc­tion statewide. For many years, installation of fire sprinkler systems has only been required in office buildings and multi-family dwellings (i.e. apartments). These sprinkler systems are proven to save lives and extinguish fires. Prior to the adoption of the 2010 California Building Standards Codes, more than 150 jurisdictions in California had a local residential fire sprinkler ordinance.

“Next time you need a belly laugh you can look at the 2012 International Residential Code section R313.2 - “An automatic residential fire sprinkler system shall be installed in one- and two-family dwellings”.”

And the next time you think you understand IBC or ICC, make your career path in design and construction. Until then, don’t quit your day job pimping Housing Crime Syndicate fluff.

The State of California requires fire sprinklers in all new one and two family homes.

Went into effect January 1, 2011.

I was just pointing out the fallacy of the simplistic math of CHS, and blindly accepting what he says as true.

What you say is correct mathematically, but you assume, once more that people are up against the limit of what they can pay, in all circumstances. This is simply untrue. Are there people up against such limits? Yes…perhaps they shouldn’t be buying at all if they need to stretch so far to purchase.

Not everyone is stretching to pay every list dime that they can pay, they are trying to pay as little as possible for what they want.

“So what happens to the monthly payments when the mortgage rate doubles from 4% to 8%? The payments double, too.”

______________

They don’t double overnight. ARMs have a maximum increase per year. Typiclaly it’s 2% per year and 5% maximum for the life of the loan. The 4% to 8% would happen over 2 years. And when is the last time a mortgage was 8%? 2000? 1999? I suppose anything can happen, but the likelihood of seeing 8% mortgage rates in the next 10 years is quite low.

The Fed purchased $54.7 million this week. Last time such an amount was purchased was back in April. They are accelerating their credit expansion while rates go up.

I have not followed what is happening in Brazil…Just watched a few news clips on the demonstrations…So whats going on…Is this push back from the crack down on the poor area’s of Brazil in preparation for the world cup ??

Stagnant GDP growth of 2.2% for the last 5 or 10 years doesn’t sound like a booming economy.

Wasn’t Brazil one of the countries that China was pouring lots of money into?

Pour lots of money into an economy and the economy booms? What a surprise!

Stop the pouring of money and the economy tanks? Another surprise!

But they are spending billions on the World Cup stadium!

Speaking of Brazil….

With farm bill defeat, Americans on hook for $147M a year to Brazilian cotton farmers

http://www.foxnews.com/politics/2013/06/21/americans-forced-to-pay-brazil-147-million-year-after-house-farm-bill-failure/

On a different subject, where is the gold bug who loves nationalized health care, Rio?

Brazil’s President pledged last night that all oil royalties would henceforth be put back into the country’s educational system. She also promised significant reforms to health and social services.

Sounds like a pretty responsive government to me….

Wasn’t someone here talking up the socialist utopia of Brazil? I guess it’s not so great after all.

To be fair to Rio millions of Brazilians did move out of poverty. Brazil’s problem is that its economy, much like China’s, depends on us Gringos living beyond our means.

Something to keep in mind is that many Americans are just as upset about the state of the US economy and the lack of concern of the political class. The difference is that the PTB have convinced the American people that nothing can be done. So instead of getting out in the street like the Brazilians, Turks, etc., Americans sit alone at home and yell at the TV news.

The exceptions during the Obama years have been the Tea Party and OWS folks, who are to be admired for understanding that a citizen’s political activity need not be limited to voting.

Here is some useful current perspective from the Mumbai, India financial news.

Hint: It isn’t the U.S. dollar that foreign investors are avoiding.

Dilip Kumar Jha | Mumbai
June 22, 2013 Last Updated at 21:13 IST
Consumers stay away from fresh gold purchases despite price fall

A drastic decline in the rupee restricted the quantum of price fall in the domestic market

Gold found support at its recent two-and-a-half-year low of $1,272 on aggressive bargain hunting by Chinese buyers, who accumulated the yellow metal as a safe hedge against other asset classes. Indian buyers, however, abstained from taking benefit of this opportunity as the drastic decline in the rupee restricted the quantum of price fall in the domestic market.

The bullion for spot delivery tumbled to $1,272 an ounce (oz) on Friday after Federal Reserve chairman Ben Bernanke hinted early withdrawal of it $85 billion monthly bond-buying programme, popularly known as quantitative easing (QE). The Fed’s growing confidence in the US economy, supported by the favourable unemployment data, strengthened the US dollar against major global currencies. The event has also enhanced investors’ potential of returns from the US treasury bond.

Gold declined 23 per cent this year in dollar terms, but the quantum of fall was capped at just 12.24 per cent in Indian markets due to the drastic decline in the rupee. The rupee fell sharply to hit the historical low level of 60 against the dollar, but recovered later to close the week at 59.27 on Friday. Overall, the Indian rupee depreciated 7.72 per cent this year.

“Bargain hunters largely from China rescued the bullion from further fall. They bought on every decline of gold amid expectations of its upward movement, going forward. Since the bullions are trading currently close to their respective cost of production, a further fall may force miners and smelters to cut their production,” said Gnanasekar Thiagarajan, director, Commtrendz Research.

A decline to the level of $1,245 and then further to $1,200 cannot be ruled out before pulling back to $1,325 on production cut to be announced by miners and smelters, Thiagarajan added.
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Isn’t it curious how even though there were no asset bubbles in stocks, bonds or precious metals, they all are crashing at the mere hint of QE3 withdrawal?

Funny, isn’t it, how some claim current prices are not above long-term trend, when your graph clearly indicates otherwise. Apparently housing prices have achieved a permanently-high plateau.

Hey Patrick:

Weird. Do you guys get Toyotas in Canada?