Bits Bucket for June 30, 2013
Post off-topic ideas, links, and Craigslist finds here.
The Housing Bubble
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Is the charge against Snowden that he released sensitive documents, or that he spilled the beans on a spying operation of unprecedented depth and scope?
I think the charge or charges against Snowden are a moving target.
Snowden document reveals US bugged, spied on EU
By Julia SIEGER (video)
News Wires (text)
7 hours ago
Washington targeted European Union offices in Brussels and the United States, German weekly Der Spiegel reported Sunday, in fresh spying allegations attributed to US fugitive Edward Snowden.
The story, the latest in a series of allegations about US intelligence activity, is likely to further strain relations with its European partners.
European Parliament President Martin Schulz said in a statement he was shocked at the allegations and demanded full clarification from Washington.
Der Spiegel said its report was based on confidential documents, some of which it had been able to consult via Snowden.
It was former intelligence analyst Snowden who earlier this month revealed details of the so-called PRISM programme operated by the US National Security Agency (NSA).
He is currently in the transit area at Moscow airport, seeking a country that will accept his request for asylum.
One document, dated September 2010 and classed as “strictly confidential,” describes how the NSA kept tabs on the European Union’s diplomatic mission in Washington, Der Spiegel said.
Microphones were installed in the building and the computer network infiltrated, giving the agency access to emails and internal documents.
The EU delegation at the United Nations was subject to similar surveillance, Der Spiegel said: the leaked documents referred to the Europeans as “targets”.
And the spying also extended to the 27-member bloc’s Brussels headquarters.
http://www.france24.com/en/20130630-usa-europe-prism-scandal-washington-spying-brussels-offices - - Cached - Similar pages
“Dude, where’s my country going?”
His crime is telling the truth.
IDK what the charges are, but spilling the beans on a spying operation is different than leaving the country with laptops full of names of agents. The former would have accomplished his stated purpose of exposing spying on Americans.
The latter puts specific lives at risk and could eliminate the entire structure of American foreign intelligence. Is that a good thing?
Well NO but what other choice did he have except solitary confinement in some abandoned missile silo in north dakota till his death…
Find a sympathetic reporter, or congressman for that matter, and give them the information, anonymously if he thought it necessary.
Happy,
I’d argue that dismantling the global “intelligence” network would be in the best interests of the entire planet. But then I’d argue that the whole “us” versus “them” mentality they perpetuate is quaint and counterproductive — and everyone would freak out and call me a commie for trying to stifle competition and disrupt capitalist revenue chains.
I find the very idea of a self-selected group of people having access to information that I, as an interested/informed citizen, do not to be intrinsically undemocratic at best, and arrogant in the extreme.
“The government does not have the right to know how boring I am.”
t-shirt motto suggested by a participant in the Washington Post web chat a few weeks ago
Europe furious, ’shocked’ by report of U.S. spying
By Josh Levs, CNN
Updated 8:33 AM EDT, Sun June 30, 2013
Magazine: U.S. bugged EU offices
STORY HIGHLIGHTS
* NEW: White House official notes close intelligence relationships with Europe
* Der Spiegel reports that the U.S. bugged EU offices and infiltrated a computer network
* If true, it would “have a severe impact on EU-US relations,” a European official says
* A top Russian lawmaker calls Snowden a political refugee
(CNN) — European officials reacted with fury Sunday after a report that the U.S. National Security Agency spied on EU offices.
The European Union warned that if the report is accurate, it will have tremendous repercussions.
“I am deeply worried and shocked about the allegations,” European Parliament President Martin Schulz said in a statement. “If the allegations prove to be true, it would be an extremely serious matter which will have a severe impact on EU-US relations. On behalf of the European Parliament, I demand full clarification and require further information speedily from the U.S. authorities with regard to these allegations.”
German Justice Minister Sabine Leutheusser-Schnarrenberger “said if the accusations were true it was reminiscent of the Cold War,” ministry spokesman Anders Mertzlufft said, adding that the minister “has asked for an immediate explanation from the United States.”
The German newspaper Der Spiegel reported that “the U.S. placed bugs in the EU representation in Washington and infiltrated its computer network. Cyberattacks were also perpetrated against Brussels in New York and Washington.”
…
So what will freedom of speech look like in the 21st. century?
2 things will likely happen; At some point the internet will be zoned off in political-economic blocks or layers. Later, biometric ID will be required to access digital networks. I think it’s imbedded in the natural evolution of future of networks. In other words, it’s going to happen and we can’t stop it but we can see it coming. How do you write laws to protect our 18th. century constitutional rights?
Turkish government is looking through Twitter and other social media to hunt down and arrest the organizers of the anti-government rallies.
So when governments become tyrannical, internet will be used against its people. So people will have to do alternative things to fight tyranny. Pre-Internet communication like the militia of the revolution.
Or everyone should do PGP consistently. If tens of millions of people PGP their vacation plans, weddings, parties, children’s first missing tooth, as well as the things government hates and threatens to outlaw, then government will be overwhelmed with too many people to suspect as terrorists. Remember, if you encrypt at all, since very few people do so, your encrypted files will be archived by the spooks.
Darknets abound.
As if EU, Asia, et al haven’t been spying on the US for the last 250 years. What I cannot understand is all the outrage over what any sentient person on this planet knows is only social nature. Better technologies = better intrusions.
Brave whistle-blowers like Assange, Manning, and Snowden have always been among us, but with the advent of the internet, their revelations are reaching a far broader audience and disrupting far more machinations than ever before; the palace intrigues have finally become accessible to the common man.
If you’re paranoid about all the snooping remember:
Vietnamese peasants and Iraqi goatherds defeated the most powerful military machine in the history of the mankind using the most mundane defenses imaginable. “Shock and Awe” was met with exploding cell phones. Napalm and Agent Orange with punji sticks and dirt tunnel cities.
NSA and state craft in general will go down in defeat thanks to a technology intended for gossipy little schoolgirls.
NSA and state craft in general will go down in defeat thanks to a technology intended for gossipy little schoolgirls.
Or is it the other way around?
After a brutal first half, is it safe to assume that gold has nowhere to go from here but up?
This story is reminiscent of the troubles which awaited American latecomers to the California Gold Rush.
Ghana’s Crackdown on Chinese Gold Miners Hits One Rural Area Hard
By DAN LEVIN
Published: June 29, 2013
* Zhuo Mao with his grandson, awaits news of his son, who is missing in Ghana.
* Yang Baofa, center, recently returned from Ghana with barely enough money to get home.
Gilles Sabrie for The New York Times
MINGLIANG, China — To the people of Shanglin County, gold is a curse.
For nearly a decade, thousands of peasants from this rural speck in southern China’s Guangxi Autonomous Region borrowed heavily before boarding flights for Ghana, Africa’s second-largest gold producer, with glinting ambitions and no backup plan.
The Chinese found their gold, though trouble soon found them, in the form of crooked police officers and armed bandits who prowled the mining camps. Then, this month, the Ghanaian authorities declared the mines illegal and arrested more than 200 Chinese miners, accusing them of polluting the land and abusing local workers. Countless others fled as local residents armed with guns and machetes attacked the camps, robbing miners of their possessions and killing some who fought back.
After the crackdown, images of violent deaths and vandalized mining camps blazed across Chinese social media, fueling national anger and soul searching. But here in Shanglin, a mountainous county of 470,000 in one of China’s poorest regions, it is despair over financial ruin that is most pronounced.
“My son might be killed in Ghana, but if he comes back he’s dead anyway,” said Shen Aiquan, 65, whose family borrowed 3 million renminbi, or $489,000, to build a mining operation, though from whom exactly she did not know. All she could do was wait for her son, and the debt collectors who would surely follow.
…
It sounds like Indians stand ready in waiting to buy physical; too bad the plummeting value of their currency is pricing them out of the market.
ft dot com
June 30, 2013 10:35 am
India’s jewellers become frontline in gold battle
By Amy Kazmin in Ahmedabad, India
An Indian woman walks past a billboard advertising gold jewellery in Kolkata©AFP/Getty Iimages
The elegant, marble-floored showroom of Zaveri & Co – an upmarket jewellery shop in the Indian city of Ahmedabad – houses cases of shiny, filigree gold necklaces, bangles, rings and earrings: symbols of status and security for India’s increasingly affluent population.
Today, the shop – and thousands like it across India – are a battleground, between India’s gold hungry public and a government determined to squelch their gold buying to prop up a weakening currency.
On a recent afternoon, families took advantage of the sharp drop in global gold prices – it briefly hit a three-year low on Friday – to acquire new ornaments.
Among the buyers was F.T. Kanpurwala, an environmental engineer, who sat beside his wife and 18-year-old daughter, as they scrutinised delicate bangles. Mr Kanpurwala said the family buys gold jewellery regularly – at least quarterly – especially when prices dip.
“Indians have a tradition of a deep attraction to gold,” he says. “We are buying often. Whenever prices go down, we use it as a chance to buy. It’s a desire for ornaments, and it’s an investment. It’s a family preoccupation.”
Despite a steady flow of trade from like-minded customers, the shop’s 65-year-old owner, Zaverilal Vrijbhai Mandalia, is worried.
P. Chidambaram, India’s finance minister, has publicly and repeatedly blamed the hunger for gold as the main cause of the country’s ballooning current account deficit, which has put heavy pressure on the rupee.
The currency tumbled through the important level of Rs60 to the dollar, hitting a record low of Rs60.70 last week. Mr Chidambaram has appealed to Indians to stop buying gold to help the currency and the economy, but so far ruled out any outright import ban.
Instead the Congress-led government is squeezing gold imports through other measures, which jewellers complain are already hurting their business. Like many gold traders, Mr Mandalia, a third generation jeweller widely known as Zaveribhai – or ‘Jeweller-brother’, fears India is being propelled back to the bad old days of goldsmuggling gangsters, whose exploits were a staple of Hindi movies.
“We are very much afraid,” he said. “Even if the government stops imports, the people must buy, and they will buy – from anywhere.”
Previous Indian government efforts to battle the public’s compulsion to buy gold have been largely unsuccessful.
…
I like silver still have a bunch of silver dollars from my youth….and picked up some DMPL morgans they look so cool like the eagle is floating on glass…
No matter how this episode of epic PM volatility plays out, the equity in the silver dollars from your youth is not going away…(I wish I knew where I put my stash!).
I still have a stash of dozens of silver maples bought during the 90s when everyone was laughing at metals buyers and pundits were saying metals are permanently losers. Just go to kitco and most commentaries are noepw bearish.
LOL!! The same people who have been screaming that stocks and real estate are in a bubble and will crash by 65% also think that the gold/silver bubble is permanent. Yeah sure, why not?
Huh? Last time I checked, gold is $1200. It was $1900 less than two years ago. Permanent what?
My comment wasn’t to you Bill. You realize what’s happening. Most here have blinders on and think 1900 to 1200 is just a blip on the way to 5000.
Once again, gold down, and a pundit, Smithers, stabs the downed asset. So you buy only when it’s an all time high? Or laugh it all the way down and never buy until it peaks again!
Just curious: how much did you buy over the last two years, Bill? And are you wishing you had deferred any of those purchases until now?
I sold out too early, two years back at $1250, but have not bemoaned any potential “lost” gains since. I prefer to avoid the madness.
If the swoon continues, I’ll think about buying some physical for the long haul.
‘The same people who have been screaming that stocks and real estate are in a bubble and will crash by 65% also think that the gold/silver bubble is permanent…Most here have blinders on’
Here’s what I’ve noticed about this poster. He/she makes blanket statements about what ‘everybody here’ thinks, connects to some dots of his/her choosing, and slams the straw-man to the ground, having soundly defeated his/herself.
I can’t tell what you are talking about half the time. The other half it’s all this ‘LOL’ stuff like you’re some kind of child genius and we should all just shut up and listen to you all day.
My average purchase price is three digits. I did not buy between July 2011 and October 2012.
I started up buying monthly in November 2012.
LOL Ben.
King of the Strawmen — it’s Non-Sequiter Man!
My favorite is when he refers to his elders as “boys and girls” or “kids”. Imagining the carnage the first time this pretentious little twerp gets kicked in the teeth by his own presumptions is the best entertainment on the internet.
A genuine feast at the Schadenfreude table.
Thanks for the history, Bill. Yes, I recall you saying that you were overweight for a period, and thus were not buying. However, those Nov 2012 to present purchases are definitely underwater.
Your policy of directing new purchase funds where needed in order to meet your asset allocation does seem to have done a reasonable job of minimizing your purchases at the worst prices, as your allocation in any given asset makes it over-weight if it gets too pricey. Nice.
“Here’s what I’ve noticed about this poster. He/she makes blanket statements about what ‘everybody here’ thinks, connects to some dots of his/her choosing, and slams the straw-man to the ground, having soundly defeated his/herself.”
In a word, moronic.
Slithers is a liar too. Scores of lies, day after day after day.
Lie Slithers Lie.
Bill, you think some people might go all in if we see PMs hit a multi-year low? Not so much the speculators that would do it, but people that want to pass on their wealth surreptitiously to heirs? You think some people who backed up the truck in 2001 might hold through thick and thin?
‘I like silver still have a bunch of silver dollars from my youth…’
In a few decades, people will think coins are barbarous relics.
There is always reason to hold out hope for higher gold prices in the near future.
Gold Bugged: Contrarians Not Ready to Give Up Yet
Published: Saturday, 29 Jun 2013 | 7:00 AM ET
By: Jeff Cox | CNBC.com Senior Writer
Gold bugs, meet your falling knife.
With the metal hitting a succession of three-year lows recently, its proponents find themselves trying to catch the proverbial plunging dagger that comes with a collapse in prices.
Yet some traders have yet to give up, believing that gold’s demise is nearing its end.
It’s part of a broader contrarian view that figures investors are overestimating the factors colluding against precious metals. The bear market in gold has seen a 2013 price drop that approached 30 percent this week, falling below $1,200 for the first time since August 2010.
But gold bugs are a resilient species, and they aren’t about to go down easy.
“Short gold futures positioning on COMEX is at an all-time high and nearly every broker is now negative gold,” analysts at ETF Securities said in a report. “Therefore, while further downside in the short-term is possible, investors with longer-term time-horizons may start to look at the recent sell-off as a longer-term accumulation opportunity.”
For most of 2013, though, investors have been running for the exits as fast as their trading platforms can carry them.
The SPDR Gold exchange-traded fund—a highly popular way for investors to get in on the trade without holding physical gold—has seen more than $18 billion in outflows this year, losing nearly 30 percent of its assets under management, according to IndexUniverse.
Some of the recent selling likely was related to fears that the Federal Reserve would begin decelerating the amount of money it was creating to buy bonds. The Fed currently spends $85 billion a month on the quantitative easing program, which has been accompanied by fears of inflation that have yet to materialize. Gold has long been thought of as an effective inflation hedge.
But even when Fed officials on Thursday said QE would not end as long as the economic data remained soft, gold continued to sell off despite a Treasury yield drop.
The gold proponents at ETF Securities say the softening economy will actually help gold prices because it will keep the Fed in the money-printing game.
“If this occurs, the Fed will likely step back from QE reductions. With gold positioning so negative, this has the potential to stimulate a strong short-covering gold price move,” the report said.
…
Why buy gold now, when you can get it for 65% less in a few years?
June 30, 2013, 3:57 PM
Gold Standard? China Doesn’t Set It
Reuters
An employee arranges gold jewellery in the counter of a gold shop in Wuhan.
As global gold prices on Friday recorded their worst quarter since the start of modern gold trading in 1974, industry experts in Shanghai were talking about China’s efforts to have a say in global gold prices — and whether the efforts are having an impact.
China is the world’s largest gold producer and the second-largest consumer after India, but industry executives and professionals have been complaining that gold prices in China are just shadows of global prices and don’t have any impact on other markets.
“The U.S. and Europe still have the pricing power, although prices are usually being affected by a number of factors, such as liquidity and overall economic conditions,” said Yang Maijun, chairman of the Board at the Shanghai Futures Exchange, which is going to start night trading hours for its gold and silver contracts on July 5.
“The purpose of night trading is to help prices [on the Shanghai exchange] better connect with global prices, and to help achieve our goal of internationalizing our contracts,” Mr. Yang told the audience at the Lujiazui Forum, an annual gathering of financial policy makers and executives in Shanghai.
Beijing also introduced interbank gold trading in May last year, an over-the-counter market the authorities hope that commercial banks can play a bigger role in pricing and trading, in an effort to try to influence global prices. Trading have so far been tepid compared with high volumes on the Shanghai Gold Exchange, according to traders participating in the interbank trading.
However, the absence of a comprehensive financial system, such as a freely traded currency and an opening up of the capital account, keeps China from gaining a stronger foothold in global markets, Sun Zhaoxue, president of China National Gold Group Corp., the country’s largest gold producer by output.
Meanwhile, the average Chinese person “only holds 4.5 gram of gold,” Mr. Sun said. “That is far below an average of 24 grams per person globally So unless Chinese people have more gold in their hands, I don’t see it happen any time soon.”
China has futures contracts of gold and silver on the Shanghai Futures Exchange and spot contracts of the two metals on the Shanghai Gold Exchange. All the contracts are denominated in yuan. Global trading in spot and futures contracts are denominated in the U.S. dollar.
Gold for July delivery, the front-month contract, rose 1% to $1,223.80 a troy ounce on the Comex division of the New York Mercantile Exchange on Friday. Gold prices fell 23% in the second quarter, its biggest quarterly decline since 1974.
…
Is it ever safe to assume?
I hope the worst is over for gold (and silver). Years ago (2006-2008) I took modest positions in precious metals. My underlying rationale was portfolio diversification.
In that respect, precious metals have served their role well. I can’t count how many days that equities were down but precious metals were up. More recently, equities were up when metals were down.
The underlying premise, diversification, remains the same and my metals holdings are about double the acquisition prices.
That said, it’s still painful to watch the values drop.
Back to your original point - “safe to assume” belongs right beside “it’s different this time” as phrases to which every investor should pay careful attention.
Unless, of course, it’s safe to assume that it’s different this time.
“…it’s safe to assume that it’s different this time.”
Excellent turn of the phrase…a keeper, for sure!
bear raid in gold , kick em while their down?
I have been posting current news items on bubbles and busts here since 2004. If anyone wants to interpret my posting on an epic crash in gold as “kicking when down,” that’s their problem.
And let me offer a “heads up”: I plan to make the same kind of factual posts when the housing bubble collapses over the next couple of decades. In case you are a real estate investor who thought you were going to strike it rich, only to lose your shirt, don’t take it personally.
I know who you are. I think I’ve been here for 10 years now.
I think I’ve been here for 10 years now.
False. Even Ben wasn’t here 10 years ago.
Unless you have over 20% of your assets in precious metals it should not be painful to see prices going down, especially if you bought in 2006-2008. If you are mostly in stock index funds and have been since 2009, you are doing far better. When you combine stocks and gold, you should be ahead. That is why you have to rebalance, ake money off the table and exchange leaders for laggards.
I am doing precisely that.
Be greedy when the others are fearful.
My total allocation to precious metals is about 5-6%.
Hindsight can be a great teacher. One of the lessons I struggle with is selling high, or as you put it take money off the table and exchange leaders for laggards.
Emerging market index funds, aside from precious metals and bonds, seem to be a current laggard….
Yes good observation on emerging market funds. I DCA to VEMAX. Had it for years so my cost basis is in the green.
I recommend taking money off the table of your best performing asset class every couple of years or so. I do it when I know I will be out of work and raise cash for expenses, plus more cash to move I to a laggard asset class.
Most people ignore the cyclic nature of markets, when it is the easiest way to get ahead without trying to time the markets.
Will gold bugs lose alot more money going forward if it turns out that the end of the world is not at hand?
The Largest Gold Miner On The Planet Is Losing Billions In The Andes Mountains
Rob Gillies, Associated Press
Jun. 29, 2013, 4:22 AM 8,304 12
Pascua Lama Chile Argentina safety orange
REUTERS/Pav Jordan
Workers walk near Barrick Gold Corp’s Veladero gold mine, on the Argentine side of the border district between Chile’s Huasco province and Argentina’s San Juan province, a few kilometers from the site for the Pascua Lama gold project, some 834 km (518 miles) northeast of Santiago, Chile, February 28, 2007.
See Also
* IT’S NOT OVER: A Top Analyst Makes The Case For More Gold Carnage In This Brief Presentation
* The Cost Of Mining An Ounce Of Gold
* The ‘End-Of-The-World Trade’ Is Getting Annihilated Today
TORONTO (AP) — The world’s largest gold mining company said Friday it is slowing construction of its massive Pascua-Lama project in the Andes Mountains and will likely take a writedown of between $4.5 billion and $5.5 billion in the second quarter on the project.
Barrick Gold Corp. said it now will target first production by mid-2016 compared to the previous schedule of the second half of 2014. Falling gold prices, rising costs and a sagging stock price weighed down by its Pascua-Lama project have plagued the Canadian company. Since late 2011, the gold price has fallen by $600 — over 30 percent.
…
Has there ever been another point in financial history when the ‘flight-to-quality’ trade went so far south, so fast?
Actually, didn’t gold bottom out in the $300-$400/oz range circa Y2K before its recent run (in contrast to the suggestion in the final paragraph of this article)?
Gold plunges to lowest level in nearly 3 years
Jun. 28, 2013 7:45 PM
Written by Matt Krantz
USA Today
The price of gold sank to its lowest level in nearly three years Wednesday in a massive meltdown of the precious metals market.
Gold is suffering as investors continue to weigh comments during the past week from Federal Reserve Chairman Ben Bernanke indicating the central bank’s massive stimulus might be winding down.
If that’s true, it spoils much of the investment thesis of gold being a safe haven because now rampant inflation appears less likely and the economy is more stable.
Gold “was a bubble,” says Ken Winans of Winans International. “This is the unwinding of a bubble.”
The price of gold Wednesday fell 3.5 percent to $1,229.60 an ounce, the lowest level since Aug. 24, 2010, says Bloomberg News.
Gold is down nearly 23 percent this quarter, positioning the metal for its largest quarterly loss since 1920.
Meanwhile, the price of silver is at its lowest since August 2010. Wednesday, silver fell 5.5 percent to $18.57 an ounce.
BONDS: Investors flee funds in June
…
The question is, how low can gold go? The massive selloff of precious metals has pushed gold down roughly 40 percent from its high of more than $1,921 an ounce in September 2011, Winans says.
The last time gold crashed following a bubble was in 1980 and 1982. During that time, gold wound up losing 65 percent of its value, he says. “You’re in a structural bear market for this stuff,” he says.
Federal Reserve
Bond Markets to the Fed: We Don’t Believe You!
By Christopher Matthews
June 28, 2013
US-ECONOMY-FEDERAL RESERVE-BERNANKE
MANDEL NGAN / AFP / Getty Images
Federal Reserve Chairman Ben Bernanke leaves the stage after speaking during a press conference on June 19, 2013 at the Federal Reserve Board Building in Washington, DC.
Related
* Is The Housing Recovery Just an Illusion Created by the Federal Reserve?
* Ben Bernanke to Markets: Chill Out!
* Does QE work? Ask Japan
The stock market may steal the headlines, but in many ways its the bond market — be it mortgage-backed securities, government bonds, or corporate debt — that is the real star of the economic show. When the Federal Reserve seeks to regulate the economy, it does so by involving itself in the bond market, through buying and selling government debt and mortgage-backed securities. For years now, the Fed has been in the practice of buying bonds in order to keep interest rates low, which boosts the economy by making it cheaper for corporations and individuals to borrow. The indirect effect of low interest rates is higher stock and home values, but it’s always interest rates, rather than asset values, that the Fed watches most closely.
And for several weeks now, and especially since Ben Bernanke’s press conference last Wednesday, interest rates have been rising quickly on everything from corporate debt to mortgages. (The average 30-year mortgages hit a two-year high of 4.46% on Thursday.) In fact, many observers are now worried that spiking rates will put a damper on the already anemic U.S. economic recovery. Economists from Goldman Sachs estimate that recent rate increases could shave as much as 0.4% from growth over the next year.
Yesterday the central bank sent one of its most influential members, New York Fed President William Dudley, to try to calm markets in a press briefing. Dudley addressed fears that the Fed’s announcement last week that it would likely begin “tapering” its bond-buying program later this year would mean that it would also raise short-term interest rates. Said Dudley: “Let me emphasize that such an expectation would be quite out of sync with both FOMC statements and the expectations of most FOMC participants.”
In other words, Dudley is accusing the market of simply misunderstanding the Fed. Sure,the Fed may have announced that it would pull back on bond purchases later this year if economic conditions warrant, but that would be a very gradual process and shouldn’t warrant a rise in short-term interest rates any time soon.
So why are investors bidding up interest rates anyway? After all, the Federal Reserve has the ability and the willingness to do whatever it takes to keep rates low — and Fed officials from Bernanke to Dudley have been at pains to stress their desire to keep rates low for at least a couple more years. Part of the answer to this mystery is that markets aren’t always rational, and a Fed exit from a bond buying program is an unprecedented situation. So owners of all sorts of debt may simply be worried about being heavily invested in markets that could behave unpredictably in the future. Bonds have had a good run the past several years, so why not get out now before the Fed does finally move to raise rates?
If that’s what’s going on, however, it reveals a major flaw in the Federal Reserve’s efforts to exert control over market expectations. Since the crisis, Ben Bernanke has used statements and promises to help goose the economic recovery. The theory is that if the Fed not only lowers rates, but convinces consumers and businesses that rates will remain low long into the future, they’ll be more likely to make decisions that will support the economy. But playing with expectations is a dangerous game. After all, the future is uncertain, even for the all-powerful Federal Reserve. Investors aren’t so much “fighting the Fed,” as the famous maxim warns against, as trying to get out ahead of an inevitable wind-down. After all, if there’s anything the Fed has made more clear than its desire to keep interest rates low, it’s that it eventually plans to raise them again.
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Coolest part of the volatility in stocks, bonds, precious metals and FOREX: IT ALMOST HAS TO SPILL OVER INTO U.S. HOUSING.
However, due to the lag in reporting of housing statistics relative to the timing of transactions, we won’t have any evidence on this for several months to come.
Meanwhile, try not to catch yourself a falling knife real estate investment.
people have dollar signs in their eyes right now chasing home prices.
They tend to buy when prices are going up.
If it is wrong to buy when prices go up (everyone on the bandwagon) isn’t it right to buy when prices go down (everyone saying its for losers)? Why doesn’t our buddy apply this strategy to gold?
gold had a nice rum, it couldn’t last forever. you had the opportunity to cash at at 1700. you got greedy. Markets dont go straight up forever.
I think its to early to buy cause of the bear raid.
Gold is money. I also build up fiat. Fiat is also money. If I was greedy for gold, my holdings should have been 60% of my total assets. Well they were nine percent at the beginning of the year. So much for “greedy.” now they are 7%. Why would I sell since my asset allocation is supposed to be ten percent? I sold a few years ago to cut from 12% to 10%.
Now I sell stocks because I am too heavy in them. I am fearful on stocks and NOW I am getting greedy on gold.
your to early on gold, let the weak hands lose their @ss first.
What price is the bottom and why?
I do not trust any opinion, armchair, or professional adviser, on when to buy anything.
If you do have the ability to call a bottom, you should short NOW. put all your assets on the short!!!!! And short on margin! Make millions!
The when it hits the bottom you go long. You borrow too to go long betting on the futures. Now you are up tens of millions!
See? How many people do you know did this to gold, VIX, S&P?
I don’t know the bottom on real estate either. So I made my own rule of thumb, which is to never borrow more than one sixth of your net worth on any house you buy. Include dream home. This takes emotion out of investing or buying. It is a great substitute for dollar cost averaging. Since you cannot dollar cost average into houses. On asset classes with small prices per unit, dollar cost averaging and rebalancing removes emotion from investing.
My whole approach is objectivivity, not emotion, at least when it comes to personal finance.
Here in the US gold is not money unless you are willing to pay for stuff with the face value of the coins. One of the drawbacks to gold is when you need to exchange it for fiat you only have a few outlets; coin shops, PM exchanges, pawn shops. Generally speaking for large cities the ratio of dealers to the population size is too small. In a panic this will cause problems. The thing I like about gold is that it depends a lot on the human nature of greed. This makes it a ideal currency for bribes and barter for illegal goods and services. Most people don’t need a lot of gold to get through life.
Most people don’t need a lot of gold to get through life.
Most people get through life without _any_.
Most people get through life without eating escargot. What’s the point?
“So I made my own rule of thumb, which is to never borrow more than one sixth of your net worth on any house you buy.”
If everyone followed this rule of thumb, >90% of the population would be renters. This would include my folks who borrowed from parents for their down payment in the 1950s. Their house has been paid off for almost 30 years. They would have been hit harder by the inflation of the 1970s if they had waited to buy.
“My whole approach is objectivivity, not emotion, at least when it comes to personal finance.”
Emotional investing is dangerous and generally leads to following manias and downturns.
Most people get through life without eating escargot. What’s the point?
I thought his point was clear: gold is not money in the US, because it is not accepted at the majority of stores. In that way, it is similar to any foreign currency; I also cannot go down to the corner store and buy a gallon of milk with leftover Euros.
I like it: gold is a foreign currency.
If everyone followed this rule of thumb, >90% of the population would be renters. This would include my folks who borrowed from parents for their down payment in the 1950s. Their house has been paid off for almost 30 years. They would have been hit harder by the inflation of the 1970s if they had waited to buy.
And the bad thing about it is? At least you are not stuck in the credit bubble and I think that’s far more fullfilling than to pay rent to a bank for 30 years.
“And the bad thing about it is? At least you are not stuck in the credit bubble and I think that’s far more fullfilling than to pay rent to a bank for 30 years.”
I am not saying that it is a bad rule of thumb for you. And I am not looking to take on a 30 year mortgage. For the general population, it would be extremely restrictive.
By the time I had my first apartment, my folks were paying less for their mortgage than I was for rent on a one bedroom place. My rent now is probably 5 times what they pay for taxes, insurance, and maintenance.
Buying now may not be the right time, but buying when they did was. Buying where they did was also good. The neighborhood is stable in a desirable suburb of Pittsburgh, a city that has not experienced population booms and busts. It is not very dense and is not likely to become a ghetto in their lifetime. They are able to age in place in a stable social group with neighbors they have known for decades.
There are benefits and risks to buying that go beyond a simple financial calculation.
Your rule of thumb would have meant that only the already wealthy would have bought. Single family housing would be rare. Our cities would look more like the beginning of the 20th century, with limited suburban sprawl. We might be better off if that had been our model.
Yep the lag. Which is even bigger because the reports on bad statistics will be ignored or explained away until long after they are undeniable.
Everyone wants to rewrite history now about the timing of the last bubble, but the cheerleaders and most average people believing them didn’t admit anything bad was going on for years after until practically everyone knew personally people vastly underwater or who’d been foreclosed on.
BREAKING NEWS
China’s Manufacturing Expands at Slower Pace Amid Credit Crunch
Who Goes to Cash Reveals Extent Bonds Will Turn Into Bear Market
By Mary Childs & Daniel Kruger - Jun 30, 2013 7:00 PM ET
Investors who poured $1.26 trillion into bond funds in the past six years pulled out record amounts of cash last month, leaving the world’s biggest fixed-income managers struggling to stem the flow.
The funds saw $61.7 billion of withdrawals as money market mutual fund assets rose $8.17 billion in the week ended June 25, according to TrimTabs Investment Research and the Money Fund Report. Bank of America Merrill Lynch’s Global Broad Market Index dropped 2.9 percent in the past two months, the most since the inception of the daily gauge in 1996, as Federal Reserve Chairman Ben S. Bernanke laid out possibilities for reducing the $85 billion in monthly bond purchases supporting the economy.
The Conference Board’s Consumer Confidence index rose to 81.4, exceeding all forecasts in a Bloomberg survey and the highest since January 2008, from a revised 74.3 in May, the New York-based private research group said June 25. Photographer: Sam Hodgson/Bloomberg
Job seekers wait to interview with company representatives at the Hire Live Job Fair in El Segundo, California. U.S. economy has added an average of 189,000 jobs each month through May, the fastest pace since 2005 when it created 207,000 positions per month, Labor Department data show. Photographer: Patrick T. Fallon/Bloomberg
Market bears say losses are just getting started because yields barely exceed inflation, leaving little relative value in bonds as the global economy improves. Pacific Investment Management Co., BlackRock Inc. and DoubleLine Capital LP, which together oversee about $6 trillion in assets, said the worst is already over because the securities are fairly valued.
“We are at a definite inflection point,” Richard Schlanger, who helps invest $20 billion in fixed-income securities as a vice president at Pioneer Investments in Boston, said in a telephone interview on June 28. “If this thing continues in this vein, people are going to throw in the towel and you’re going to get this pain trade. And the markets can’t take it. They’d rather see a gradual rise in short-term rates versus a precipitous rise.”
…
looking at an eight year chart…gold seems to always go up in august…
My whole division has to re-apply for their jobs.
If you have to apply with your current employer you might as well apply at a bunch of other places at the same time. Only seems fair.
Good point Carl! Very good point!
And ask for more money.
This happened at my former client when another company bought them several years ago. Sometimes being an employee is no different than being a contractor. But a contractor goes through scrutiny, probationary periods, etc on new gigs all the time. Such things are actually good because it forces you to be at your best.
Now that I am becoming a direct hire, I have 13 years of consulting, and my habit of professionalism has done me well. Never before has an organization been so eager to hire me. 54 years old. And whatever happened to age discrimination?
Dude, don’t do it!!! Don’t go to the dark side W2 cube dweller dark side.
Seriously though the level of work ethic, productivity/efficiency between consultants and cube drones is night and day. Cube drones clock watch, consultants get things done. And that’s why they make the big bucks, they have to do the job of 2 or 3 people.
True, but slimy managers, when the big programs are cut, protect the clock-watchers and get rid of the contractors. This is a fact and is exactly what happened to me last week.
In essence it escalates the destruction of the company. The level of productivity of the remaining staff goes way down. So when/if new proposals get granted, the level of talent has already gone way down and they are up $hit creek without a paddle.
The small company I start at on the 8th used to subcontract at the place where I just got canned. They did so for years. But last year the CEO took a system engineer. As revenge, he and his company was blackballed. Nevertheless, he grabbed only former employees since then. Three more. Now he is getting me. He wants to revenge, for one thing. I am happy to help.
I do not like it when companies have management that rewards lethargic workers and kicks its talent. It’s a scam that will not last forever. They got away because they are riding off of the productivity of the few. The moneymakers of the past products are mostly gone.
By early next year the ex client will be absorbed by the new mother company (big defense firm). That company will keep five people on the one product it really wanted to buy, force the other employees maybe 90, to interview for their own job titles, lay off most of them, and put the remaining ones on totally different programs at the big office area seven miles up the freeway.
I got a headache trying to keep up with what you described. But I know the general idea. I’ve seen it a million times before. It’s the cost of doing business as a consultant.
Every time I finish up a project I think to myself, wow this company is the worst run place I have ever been. And then off to the next place I go and realize, hey they last guys weren’t that bad after all compared to this place.
But that’s fine. The more effed up a company is, the more money I make trying to un-eff it up.
In effect, most of the managers from the former client have been there for years and should be fired for protecting the clock watchers.
I did not ask for the LinkedIn recommendation of the alcoholic software manager. Because I knew he is so inept and got his title by being related to top engineers there and that his ethnicity is the same as the previous director of programs. I held my breath for a long time hoping he would not ask for my recommendation either. Now I of course do not need it.
I only recommend people who earned the recommendation.
SUGuy,
Getting that dream car is very tempting, but I already have a great 2003 Toyota, which has been very good to me. Gets me to work, has a great hatchback for moving me out of my studio.
I bought it new with a 3.9% five year loan, but doubled every payment to pay it off 2 and a half years. Effectively making it a 1.9% loan. I saved $1000 interest, worth 2 ounces of gold in 2005′ and I bought those in 2005.
It has a boring color, conservative looking, so not a thing someone would want to steal.
The Southern California common fallacy is that if you drive a car that is over $50,000 brand new, you are master of the universe.
Stanley and Danko did a study and found that A significant percent of millionaires (below $3 million) own Toyotas. For those with much more net worth, they drive Mercedes Benzes. So most of my neighbors are poseurs. Of course, my neighbors are renting apartments.
Once you are on the road, and you are driving your Jaguar, people assume your house is worth $1,000,000.
My CEO friend never paid more than $2000 for the Toyotas he’s owned. He has a Camry. His nabe in the Irvine area is upscale. I figure his annual income is well above $300,000.
“I bought it new with a 3.9% five year loan, but doubled every payment to pay it off 2 and a half years. Effectively making it a 1.9% loan.”
I’m pretty sure it’s still a loan at 3.9%…
yes still at 3.9% but the real nuts and bolts is I paid the same amount of interest on the loan as I would on a 5 year 1.9%.
jeez persnickity language cops.
jeez persnickity language cops.
He’s not being a language cop; you’re thoroughly abusing standard terminology, which leads to confusing communication.
If you pay the loan off in half the time, you have halved the _term_, not halved the _rate_.
yes still at 3.9% but the real nuts and bolts is I paid the same amount of interest on the loan as I would on a 5 year 1.9%.
Was the loan a “simple interest” loan? If not, then you didn’t pay half of the interest in reality.
Many auto loans instead have their interest computed using the “Rule of 78″ method. If you prepay on a Rule of 78 loan, you are effectively prepaying interest—e.g. a very good deal for the lender, and a terrible deal for the borrower.
Make sure you know the interest-computation details of any loan that you intend to prepay.
I would re-apply for my job but I’m afraid I might fire myself.
My whole division has to re-apply for their jobs.
Good thing unions are obsolete!
Yes it is a good thing. Unions don’t allow companies to get rid of the dead wood. While making people re-apply for jobs is kind of a dumb idea, not allowing companies to fire unproductive workers is an even worse idea.
Iv’e worked union and I’ve worked non-union. Union is better.
With a union you get this strange concept called rules. And once these rules are set into place they cannot be changed at the mere whim of a boss. Not saying the rules cannot be changed, just saying they cannot be changed at the whim of a boss.
This is not necessairly so at places where there is no union.
Ding! Ding!
Unions = permanent laziness and shoddiness.
Especially Credit Unions.
“Unions = permanent laziness and shoddiness.”
A long-time friend is a Pharmacist and a Union member who doesn’t resemble this statement.
Union bosses ruined unions.
As REIT’s begin unloading their rent-to-own inventory, will we see more and more flouting of Section 8 density laws? Hey, at least there’s finally a way for enterprising millennials to profit from the trickle-down housing bubble.
“…Dan Burton says he “got bored” studying at the LSE and stumbled into property after subletting spare rooms to student friends in 2009. Three years later, he claims to be making a £35,000 monthly profit, with 200 sublet rooms generating an annual rent of £1.8m. He is at the forefront of the “rent-to-rent” craze which enables investors to cash in without having to put up any capital to buy a house or flat….
…Former schoolteachers Fergus and Judith Wilson have 700 houses around Ashford and Maidstone, in Kent, bought using buy-to-let loans. “Life could not be better,” they say. The typical rent they charge on a two-bed house has risen from £725 in 2008 to £850….”
http://www.guardian.co.uk/money/2013/jun/28/new-class-landlords-profiting-generation-rent
Late response:
Comment by Housing Analyst
2013-06-29 19:42:29
[...]You don’t get any more synonymous than housing demand/mortgage apps but we don’t expect you to wrap your dishonest mind around that reality.
Um, false. alpha’s point is a fair one: purchase mortgage applications (PMA) are at 1997 levels, and that is an excellent indicator of demand, but it ignores the component of total demand from cash buyers, which appears to be near an all-time high.
So PMA isn’t a good indicator of _total_ demand, though I would argue that it is a good indicator of typical organic end-user demand; in other words, I would also argue that the fraction of end-user buyers that require a mortgage is roughly constant over time, and that the demand from all-cash buyers is primarily indicative of investors, rather than end-users.
“which appears to be near an all-time high.”
Nonsense. Cash buyers are exiting the market. Not entering.
THINK
Cash buyers are exiting the market.
Do you have any supporting evidence for this claim?
Do you have any evidence to substantiate they aren’t?
PIC, the June report from Corelogic would seem to indicate that the percentage of homes sold to investors has fallen somewhat from 2011/2012 levels in a few of the bubble states (Page 6).
http://www.corelogic.com/research/the-market-pulse/marketpulse_2013-june.pdf
However, it does look like the number if flattening out, not continuing to fall. My suspicion is that the “buy to rent” investors are starting to taper off while the “buy to flip” investors are starting to pick up the slack.
I would still guess that many of these are cash buyers.
Comment by Mr. Smithers
2013-06-29 13:56:59
“How much sense would it make to have a dozen different companies all running completely separate systems of electrical wires all over town? How efficient would that arrangement be?”
Works just fine with multiple companies running cable lines all over town.
I don’t know where you live, Smithers, but in most of the places that I’ve lived, there was only a single set of cable lines running all over town, because cable was a regulated monopoly.
Did you stop living sometime around 1995? Because that’s about the last time cable companies were regulated monopolies. I live in a small market area and I have 3 cable companies I can choose from.
Where is this place that has 3 cable companies that you can choose from?
I find this to be a very interesting statement, one that I want to look into. I find it interesting in that it does not seem to make much sense.
Unless it is one infrastructure that you are talking about that is being shared by three competing companies. That would make sense.
Then again it may be a question of semantics. There could be severals cable-type services offered but only one actually being offered over cable (cable as defined by most people as coax).
Fiber, copper and over-the-air (i.e. Direct TV) can offer cable-type services in addition to the true cable-services offered by coax but calling these cable-type services “cable” may be stretching it a bit.
This is another Slithers exaggeration.(flat out lie in this case)
I live in a small market area and I have 3 cable
That’s not common afaik. I only have a choice of one cable company in the city/state I live and that was my experience in other states and cities I have lived. Yes all after 2000.
Ditto. Out here its Comcast or Satellite.
I live in a very densely populated and fairly well to do area right outside Washington DC. We got a second choice about a year ago. Pretty sure most of the rest of the town still has only one choice.
I think even if you’re one of the few with a choice of cable companies, they are still using the same actual fiber optic line.
1995 was when the cable build out was finished.
It’s mind-blowing to me that people pay for TV.
Must watch video - interview with dirty wars author.
http://bit.ly/1a8EXlw
TLDV: He takes both parties to task, criticizes every president from Nixon to the present, calls liberals disingenuous, slams congress, slams the executive, and doesn’t claim once that any particular party is preferable.
There is an audio book of this on the newsgroup alt.binaries.mp3.abooks.
Bad sh#t comin’.
This, just for something they thought was beer?
http://news.yahoo.com/blogs/sideshow/uva-girl-water-beer-jail-181104442.html
A prime example of why you you have everything to fear even if you are doing nothing wrong.
‘A prime example of why you you have everything to fear even if you are doing nothing wrong.’
People think I’m insane because I am frowning all the time.
My wife had to show ID for Whippersnappers!
WTF!
Comment by Rental Watch
2013-06-29 22:37:50
[...]
If there are $50B+ of homes held by the foreclosing entities, and less than $10B is held by FDIC insured institutions, where is the rest?
GREAT question. I can’t tell you how badly I wish that I knew.
I know that someone is definitely holding off on foreclosures, though, because I personally know people who moved out of perfectly livable houses 5yrs ago after receiving a notice of FC—and they recently found out that the foreclosure never went through, and the house is still actually in their name.
Finding out that you own an unwanted house is quite unfortunate; now the city is pursuing them for code violations.
Someone doesn’t seem to care about trying to reclaim the value of their collateral, nor about maximizing the value of that collateral…
BTW, the $50B+ is my estimate only the homes that have gone through the foreclosure process at about $100k per home. The “zombie foreclosures”, which is the type you describe (in the foreclosure process, but vacant), is another 300k homes (another $30B+).
Based on the FDIC data, we should be looking somewhere other than FDIC insured banks if we think that REO is being held of the market.
“I know that someone is definitely holding off on foreclosures,”
Also, if this were the case, how do you explain some states decreasing their non-current rates at FAR faster rates than other states?
Since there are many lenders that made loans in multiple states, it would stand to reason that such activities would have caused non-current loan rates fall at approximately the same (slow) pace across different states.
Since we don’t see that, something else may be affecting things.
And furthermore, since the states that have predominantly been shedding non-current loans are non-judicial in nature, and those who have been NOT shedding non-current loans are judicial in nature, I think the process of foreclosing is just as big a culprit (if not bigger) than lenders who are slow-playing the foreclosure process on purpose.
Bloomberg News
Chinese Manufacturing Gauges Fall as Slowdown Persists: Economy
By Bloomberg News
June 30, 2013
Two gauges of China’s manufacturing fell in June, underscoring a sustained slowdown in the nation’s economy as policy makers seek to rein in financial speculation and real-estate prices.
An official Purchasing Managers’ Index (CPMINDX) dropped to 50.1 from 50.8, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing. A private PMI from HSBC Holdings Plc and Markit Economics was 48.2, the weakest since September. Readings above 50 signal expansion.
Weaker gains in manufacturing and a cash squeeze in the banking system add to odds that Li Keqiang will become the first premier to miss an annual growth target since the Asian financial crisis in 1998. In the latest signal that policy makers will tolerate slower expansion (CNGDPYOY), President President Xi Jinping said local officials shouldn’t be judged solely on their record in boosting gross domestic product.
“Although new leaders have no intention to achieve a higher GDP growth, the current growth rate is quite close to the floor that new leaders have indicated to tolerate,” Lu Ting, head of Greater China economics at Bank of America Corp. in Hong Kong, said in a note today. The lower official PMI “could worsen concerns that the liquidity squeeze in June will hit economic growth,” Lu wrote.
Expansion probably slowed for a second straight quarter, based on the median estimate in a Bloomberg News analyst survey, after export growth collapsed and Li reined in record credit expansion to contain shadow-banking risks.
…
ft dot com
July 1, 2013 3:17 am
China’s reports weak manufacturing sector growth in June
By Simon Rabinovitch in Shanghai
China’s manufacturing sector weakened sharply in June, an indication that the country’s growth slowdown has deepened as the government has refrained from stimulating the sluggish economy.
The official purchasing managers’ index fell to 50.1 last month from 50.8 in May. It was the lowest reading in four months and just slightly above expectations.
In dipping towards the 50 line, which demarcates expansion from contraction in the PMI, the survey result means that Chinese factories have virtually stopped growing, weighed down by lacklustre domestic demand.
Even more alarming was a separate PMI published by HSBC that is more weighted to smaller companies in the private sector than the official survey, which focuses on state-owned companies. The HSBC PMI fell to 48.2 in June, a nine-month low.
“In terms of the magnitude of decline, this is the biggest decline in the past year,” said Ding Shuang, an economist with Citi. “This is a picture of weak demand, both domestically and externally.”
The anaemic data comes on the heels of a cash crunch that hit the Chinese financial system over the past two weeks, driving interbank rates to unprecedented highs and leading to a momentary freeze of the country’s credit market.
Because it takes time for financial stresses to be transmitted to the broader economy, the impact of the liquidity squeeze will only really begin to show in July, suggesting that there could be worse to come.
Weakness was felt across the board in the official June PMI. The sub-index for new orders fell to 50.4 from 51.8, while the output sub-index declined to 52.0 from 53.3. More worrying for the government, the employment sub-index remained depressed at 48.7, edging down from 48.8, an indication that factories are cutting jobs.
…
As student loan interest rates double, strategize to keep education debt to a minimum
Rates on newly issued subsidized Stafford loans are set to double to 6.8% on Monday. Students who take out these loans can expect to pay hundreds — or even thousands — more.
By Phyllis Furman / NEW YORK DAILY NEWS
Sunday, June 30, 2013, 9:15 PM
About 7 million students have taken out Stafford loans. A vote in the Senate on a bill that would restore the lower rate is scheduled for July 10.
Robert Dominguez/New York Daily News
Talk about a painful lesson.
The heavy burden of college costs is about to get even worse: Rates on newly issued subsidized Stafford loans — government student loans often awarded to low-income families — are set to double to 6.8% on Monday, after the Senate failed to reach an agreement to avoid the scheduled increases.
That means students who take out these loans — there are about 7 million now — can expect to pay hundreds, or even thousands, of dollars more in interest.
For those who borrow the maximum amount and pay back their loans over 10 years, the added cost would amount to $4,000, according to the Institute for College Access & Success, a nonprofit.
The average borrower will see costs go up by $2,600, Congress’ Joint Economic Committee says.
New York families are already feeling the heat.
Marc Bernstein, a legal recruiter from Kips Bay, has two daughters heading off to college in the fall: Lindsey, 17, a freshman at the University of Michigan, and Chelsea, 19, who will be a junior at the University of Maryland.
Bernstein said he might be affected by the interest rate hike. If so, “It will be a hardship. It will obviously impact us on a monthly basis and that cost will translate into quality-of-life changes.
“When the rates go up, they affect everyone,” Bernstein added. “My younger daughter feels it. She knows her parents are going out on a limb for her.”
…
“Interest rates notch biggest weekly jump since 1987″
Another thing that happened in 1987: The Black Monday stock market crash (October 19, 1987), which followed a similar spring meltdown in the bond market to this spring’s.
June 27, 2013, 11:15 a.m. EDT
Ultralow mortgage rates are going, gone
Interest rates notch biggest weekly jump since 1987
By Amy Hoak, MarketWatch
CHICAGO (MarketWatch)—Mortgage rates spiked over the past week, causing some to believe the ultralow rates of recent years could be gone for good.
What’s more, rising rates could put somewhat of a damper on the improving housing market.
The 30-year fixed-rate mortgage averaged 4.46% for the week ending June 27, up from 3.93% last week, according to Freddie Mac’s weekly survey of conforming mortgage rates. This week’s average is the highest since the week of July 28, 2011.
The spike marks the largest weekly jump for the mortgage rate since the week ending April 17, 1987, Freddie Mac reported.
Daily surveys by HSH.com show mortgage rates improving somewhat since the beginning of the week. HSH data showed the 30-year fixed-rate mortgage at 4.63% on Monday, 4.56% on Tuesday and 4.54% on Wednesday, said Keith Gumbinger, vice president of the consumer loan information firm.
“Early indications are that rates we gather today should be lower than yesterday. However, the market has been so volatile over the last five days that any dip might not be passed along immediately to the retail market,” Gumbinger said.
Mortgage rates started rising last week, after Federal Reserve Chairman Ben Bernanke spoke of the Fed’s intention later this year to scale back the stimulus program that kept rates low. Rates jumped again over the weekend, a reflection of the unsettled market.
“Following Fed chief Bernanke’s remarks on June 19th about the possible timing of reduced bond purchases, Treasury bond yields jumped over the week and mortgage rates followed. He indicated that the Fed may moderate the pace of its buying later this year and end the purchases around the middle of 2014,” said Frank Nothaft, vice president and chief economist of Freddie Mac, in a news release.
Gumbinger said it’s likely the market overreacted and that mortgage rates will move downward. But it’s probable that very low rates are gone for good. “Do I think we’re going back to 3.5%? No. Do I think we should be closer to 4% than 4.5%? Probably,” he said.
Even if market did overreact, it doesn’t necessarily mean that rates will reverse completely, said Dan Green, loan officer with Waterstone Mortgage in Cincinnati. “Mortgage rates are trading on fear and sentiment, and right now those forces are pulling rates higher.”
…
It’s beginning to look alot like October 2008 again. Check out the chart at the top of this article, for instance: The only time similarly ginormous bond fund outflows played out in recent years was November 2008.
More money may flee bonds in July, even if yields fall
June 28, 2013, 1:35 PM
Surging outflows propelled bond funds to an ugly June. But don’t expect those outflows to abate in July.
U.S. mutual funds and exchange-traded bond fund outflows may continue — even if the recent rise in yields doesn’t. When retail investors open their quarter-end statements and see losses in their bond funds, they may decide to sell, strategists say.
“My sense is that whenever you have bad months, there’s always momentum when you have outflows. People will get their quarterly statements, and to the extent that they get the message that the Fed is starting to normalize policy, I’d expect more outflows,” said Rajiv Setia, head of U.S. rates research at Barclays.
Taxable bond mutual funds and exchange-traded funds had $8.6 billion of net withdrawals in the week ended June 26, according to data from Lipper. Over the course of the last four weeks, net outflows totaled $23.7 billion, the biggest four-week drop since October 2008, during the height of the global financial crisis.
The outflows reflect panic from investors as yields surged, pushing down bond prices, after the Federal Reserve signaled its intention to scale back its monthly bond buying. That handed steep losses to bond funds, which investors usually expect to perform well. Even big-name managers like Bill Gross lost money.
Other estimates paint an even worst picture. Through June 24, investors this month pulled a record $61.7 billion from bond mutual funds, according to data from TrimTabs Investment Research.
The four-week moving average of fund flows has spiked in equal measures for taxable bond funds and exchange-traded funds, according to Lipper data. Mutual-fund outflows averaged $3.50 billion a week over the last four weeks (chart above), while exchange-traded fund outflows averaged $2.43 billion (chart at left).
Steve Van Order, fixed income strategist with Calvert Investments, sees the worst as having passed, but thinks a smaller second wave of outflows is in store.
“The more active financial advisors and ETF traders have made their statements. The next wave will be when retail investors see quarterly statements. Typically when people see negative returns in bonds, they take action because they’re not used to seeing that,” Van Orden said.
…
Apparently, unlike California home prices, Ohio home prices do not always go up.
Jun 21, 2013, 6:59am EDT
Zillow: Dayton home prices dip slightly in May
Online real estate firm Zillow says Dayton home prices fell 0.2 percent in May, compared to the previous year.
Ohio saw a mixed bag when it came to May home prices.
Online real estate firm Zillow says home prices rose in several cities, but declined in others including Dayton.
In its latest report, Zillow lists the average home price in the Dayton region at $91,100, a 0.2 percent decline from the previous year.
Other Ohio cities fared better such as Cincinnati (up 0.4 percent), Cleveland (up 2.4 percent) and Columbus (up 4 percent). However, Toledo saw its prices drop 1.1 percent.
In terms of local cities, Beavercreek saw home prices drop 1.9 percent in May compared to the previous year, while Piqua saw a 4.6 percent increase.
By comparison, the Dayton Area Board of Realtors reported Thursday the average sale price locally declined 1.1 percent in May to $130,000.
Overall, home sales continue to soar locally, rising 11 percent last month.
…
June 29, 2013, 6:02 a.m. EDT
New Doomsday poll: 98% risk of 2014 stock crash
Commentary: 10 bubbles blowing into biggest crash in 30 years
By Paul B. Farrell, MarketWatch
SAN LUIS OBISPO, Calif. (MarketWatch) — Yes, 2014 is an absolute total disaster just waiting to ignite. In “Doomsday poll: 87% risk of stock crash by year-end” we analyzed 10 major crash warnings since early this year. Since then, more incoming bogies raced across our radar screen. Ticking time bombs from Congress, the Supreme Court, sex, carbon emissions, Big Oil, NSA, IRS, Tea Party austerity. Relentless. Mind-numbing.
So many are tuning out. Denial. Truth is, bubbles are everywhere. Ready to blow. The evidence is accelerating, with only one obvious conclusion: Max 98% risk at a flashpoint. This 2014 crash is virtually guaranteed. There’s but a narrow 2% chance of dodging this bullet.
Here are the 10 bogies, drones targeting markets, stocks, bonds and the, global economy:
1. Bubble With No Name Yet triggers the biggest crash in 30 years
All three of the big worldwide financial bubbles that have blow up in the last three decades have “been fueled by the Fed keeping policy rates below the nominal growth rate of the economy far too long,” says global strategist Kit Juckes of the French bank Societe Generale.
The three bubbles: The Asian Bubble in the early ‘90s, Dot-com Bubble of the late ‘90s and what Juckes calls the Great Big Credit Bubble that triggered the 2008 Wall Street meltdown.
Juckes warns that we’re now trapped in the fourth megabubble fueled by the Federal Reserve in the last 30 years, since the rise of conservative economics. He calls this one, the Bubble With No Name Yet. OK, we invite you to send in your nomination to name the new bubble. But whatever you call it, do it fast, it’s close to popping, like the Asian, Dot-com and Credit crashes the last 30 years.
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Arizona Officials: 19 Firefighters Killed Battling Yarnell Hill Blaze
Very sad news.
A friend of ours flies planes for the BLM (fighting fires) and was working overtime this weekend. I don’t think he was in AZ fighting fires, but whenever I see articles like this, I’m glad he’s not a smoke jumper. It’s no picnic up there flying, but it’s better than jumping out of the plane.
I sometimes think firefighters are overpaid, and then fire season hits, and I realize, when I see the engine/crew at my local supermarket, it’s an exhale. Those guy and few gals work a dangerous job.