August 10, 2013

Bits Bucket for August 10, 2013

Post off-topic ideas, links, and Craigslist finds here.




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115 Comments »

Comment by Housing Analyst
2013-08-10 05:18:00

If you take on mortgage debt at current massively inflated housing prices, you’ll enslave yourself for the rest of your life.

“Debt is bondage.”~ Suze Orman, May 11, 2013

Don’t Be A Debt Donkey®

Comment by azdude
2013-08-10 05:33:49

more of the same rubbish again? suze bankrupted you didn’t she?

Comment by Housing Analyst
2013-08-10 06:29:24

Here’s a wonderfully truthful quote for you $hithouse Poet.

“Housing is never an investment. Housing is a depreciating asset and always a loss.”

Comment by azdude
2013-08-10 06:50:12

your a follower arent you?

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Comment by Bubbabear
2013-08-10 07:19:24

I’d have to say H.A. is a leader ….

What The 25% Collapse In Homebuilders Stocks Tells Us

Right now, the U.S. housing market is being threatened by the mixed messages the Federal Reserve is sending to the marketplace.

http://www.testosteronepit.com/home/2013/8/9/what-the-25-collapse-in-homebuilder-stock-prices-tells-us.html

 
Comment by Whac-A-Bubble™
2013-08-10 09:01:37

“What The 25% Collapse In Homebuilders Stocks Tells Us”

Maybe it’s different this time, but the last time the big Wall Street listed national-level U.S. homebuilder share prices took a major dip, in the 2007-08 period, this turned out to be a leading indicator not only for an unprecedented drop in the value of U.S. housing prices, but for a near-collapse of the entire global financial system.

This news clearly presages the onset of QE4 in the wake of the next leg down in U.S. housing.

 
Comment by Whac-A-Bubble™
2013-08-10 21:26:56

These Losing Stocks Are Hurting the Dow Again
by Dan Caplinger, The Motley Fool Aug 9th 2013 1:00PM
Updated Aug 9th 2013 1:02PM

Although we don’t believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes — just in case they’re material to our investing thesis.

The stock market has gone back to its losing ways so far today, with the Dow Jones Industrials falling 80 points as of 12:45 p.m. EDT. Investors continue to struggle in trying to evaluate the potential impact of changing macroeconomic conditions and central-bank tactics on the markets. Moreover, as if the usual litany of concerns that have worried market participants lately weren’t enough, today’s brief evacuation of the Eiffel Tower in light of a bomb threat reawakened investors to the geopolitical risks that have largely gone unnoticed in recent months.

Yet, one trend from Thursday’s session repeated itself today. Just like yesterday, stocks in the consumer sector again were among the weakest performers in the Dow. That’s surprising, given the strength in many of the economic areas in which these stocks focus, but it seems to indicate general uneasiness about the high valuations that some of these stocks have reached.

For instance, Home Depot dropped 1.3%. The home-improvement stock has been strong for years and has really picked up steam in light of the accelerating recovery in the housing sector, which has seen prices rise at double-digit percentage rates over the past year. Yet over the past few months, homebuilder stocks have pulled back from their recent highs, and concerns about rising mortgage rates have made investors more sensitive to the fact that Home Depot trades at a lofty 25 times trailing earnings. A pullback therefore isn’t unreasonable, but it does signal a shift from the past momentum-based trend for the stock.

 
 
Comment by Strawberry picker
2013-08-10 08:07:33

Reports from my area in PHX are that the soufflé is already starting to fall. General contractors and subs not being paid.

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Comment by rms
2013-08-10 10:39:59

“General contractors and subs not being paid.”

+1 Better hurry and get that new 4×4 dual-cab diesel pick-up. :)

 
Comment by Montana
2013-08-10 14:13:57

…350 dually…

 
 
 
Comment by goon squad
Comment by AbsoluteBeginner
2013-08-10 20:46:31

Big hat. No cattle.

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Comment by Jingle Male
2013-08-10 07:17:06

H.A.,

I took on about $2,000,000 in mortgage debt from 2008-2010. I invested about $400,000 in cash. So far, I get about $20,000/year in cash flow and the assets have appreciated in value by over $600,000. Analyze those numbers.

Your constant posting about how housing is a terrible investment and no one should buy a house are very misleading…..and wrong.

Comment by Strawberry picker
2013-08-10 07:24:45

I invested in a two dollar lottery ticket. I won 400 million in POWERBALL! Buy a ticket now or be priced out forever.

 
Comment by Bill, just South of Irvine, CA
2013-08-10 07:26:23

Do you still have that house that was purported to be $2,000,000 in 2008? Or we’re they several houses so that you had a tax free gain on your primary residence but are now renting out several depreciating assets.

 
Comment by Whac-A-Bubble™
2013-08-10 07:57:20

Did you see the posts on yesterday’s Bits Bucket about the Sacramento market seizing up for another leg down?

Hopefully for your sake, you have cashed out of your investments by now and thus are not exposed.

Comment by Blue Skye
2013-08-10 08:29:32

Nice sentiment, but it is wasted on an imposter.

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Comment by Whac-A-Bubble™
2013-08-10 08:31:19

I don’t know if it is wasted or not yet. I’m highly curious for more information on the suggestion the Sacramento market is at a tipping point; perhaps the poster who suggested it yesterday will weigh in again today?

 
Comment by Pete
2013-08-10 13:58:33

I just did a text search for Sacramento and Sac from yesterday’s bucket, and getting no results, scanned w/my eyeballs. No mention of Sac anywhere.

 
Comment by Whac-A-Bubble™
2013-08-10 21:37:53

My bad; it was on yesterday’s Friday desk clearing thread which Ben entitled There’s a Frenzy Going On:

Comment by aqius
2013-08-09 08:25:00

here in the northern sacramento area the real estate balloon has popped. there are houses sprouting up for sale like mushrooms as owners are trying to cash out at the top.

 
Comment by Jingle Male
2013-08-11 06:20:14

The Sacramento market has experienced 30% price appreciation in the last two years. The fact that the rate of appreciation may slow, or even flatten for a while is fine with me. I am not selling for any more houses for at least 10 years. The cash flow is tremendous.

 
 
 
Comment by Housing Analyst
2013-08-10 09:41:33

Step up Jingle Balls……. what are “production” costs?

And when you’re done running from that well talk about your losses on your rapidly depreciating houses.

 
Comment by AmazingRuss
2013-08-10 09:57:44

Factor in the risk premium of exposing yourself to a 20%-40% loss on that two million, and your profits don’t look so sweet.

Comment by Jingle Male
2013-08-11 06:21:42

All profit looks sweet to me…..

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Comment by Whac-A-Bubble™
2013-08-10 10:01:39

“Your constant posting about how housing is a terrible investment and no one should buy a house are very misleading…..and wrong.”

You do realize that you are among the beneficiaries of an unprecedented liquidity flood from the Federal Reserve into housing, don’t you? And that they have announced plans to end the program?

Do you count yourself among those who assume the announcements are merely a bluff?

Comment by Whac-A-Bubble™
2013-08-10 10:05:38

Is Quantitative Easing’s End Near? These Fed Officials Think So
By Curtis Tate
August 07, 2013

The chorus of Federal Reserve members predicting an end to asset purchasing through quantitative easing has increased, with Federal Reserve Bank of Cleveland President Sandra Pianalto joining the fray, Bloomberg reports.

Speaking to an audience in Cleveland on Wednesday, Pianalto said: “Employment growth has been stronger than I was expecting, and the unemployment rate today is more than half a percent lower than I projected it to be last September. In light of this progress, and if the labor market remains on the stronger path that it has followed since last fall, then I would be prepared to scale back the monthly pace of asset purchases.”

Her comments follow earlier remarks by Chicago Fed President Charles Evans, a vocal proponent of monetary stimulus, who similarly predicted an end to asset purchasing this fall.

Evans told reporters that the central bank is “quite likely to reduce the flow purchase rate starting later this year,” according to The Wall Street Journal, though he didn’t specify which month he thought this might happen. Evans seemed more confident in the Fed’s communication than others, and noted that markets are learning to cope with the reality of tapering.

If that is the case, recent market performance would be indicative of a correction for this, though time will tell if markets have braced for when tapering actually begins. Since earnings season is winding down, markets have been turning to other sources of good news to continue their historic run.

However, in the absence of buoying earnings, attention has refocused on central bank policy, according to Reuters, with the result that stocks have fallen a bit.

This kind of central bank worry is present across the pond as well, with markets watching England closely now that new Bank of England head, Mark Carney, has commenced his own forward guidance. U.S. Federal Reserve Chairman Ben Bernanke has been guiding markets on interest rates for some time, telling them not to expect hikes until unemployment falls to 6.5 percent.

Carney has followed suit, instituting a threshold of 7 percent, but with the caveat that he could raise rates if inflation rises, Bloomberg reports. Markets don’t seem convinced that he will be able to hold down rates, and speculation on pound sterling futures have followed suit.

As Bernanke prepares to end his reign of the central bank in January, speculation over the next Fed chairman or chairwoman is weighing in on the easing conversation as well. Janet Yellen, the current vice chair, is one of the frontrunners for the job, and is widely thought to have a very dovish view on quantitative easing.

But her main opponent for the job, former Harvard President Larry Summers, is expected to be much more hostile toward the policy and could end it quickly, CNN Money says.

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Comment by Shendi
2013-08-10 10:30:57

There was story yesterday in the news regarding a couple of indicators that were considered good to the economy: viz, 1) the >20% reduction in the trade deficit and (2) the reduction in unemployment claims.

Since we all know that the MS media provides only lip service to the real issues it will not come as a surprise to many here that journalist from “the economist” that commented on the above said all the rosy things including how the housing has improved etc. and at the same time cautioned that the fed stopping QE3 and congress intent on reducing the deficit could stop the gdp growth.
My question is the same that you asked above: “Aren’t these guys aware that the fed is the causing this gains to gdp, housing and what have you?”

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Comment by Jingle Male
2013-08-11 06:17:43

Ending QE 3 is no bluff. I am happy to keep my houses and cash flow. The cash will not change, only grow stronger. I have fixed rate debt and the income is increasing every year. Real estate is one of the best investments I have.

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Comment by United States of Moral Hazard
2013-08-10 15:01:36

I bought 3850 shares of Priceline stock back in 2008 for $52 share, right at the bottom. My $200,200 investment is now worth over $3,730,000. I am the most handsome man in the world, with gorgeous women falling all over each other in vain to bed me. I will be patenting a cure for cancer in the next few months. Don’t you just love the internet?

 
Comment by localandlord
2013-08-10 18:56:22

20K cash flow on houses that cost 2.4 million? That’s 1%. Not good at all. If you can’t get 6-8% it really isn’t worth the hassle. 10% + is better.

If there’s anything this blog should tell you it is that price appreciation can be illusory. Easy come, easy go. That 600K is fiction until you sell the houses, pay the IRS 90K + and put the money somewhere safe.

Comment by United States of Moral Hazard
2013-08-10 20:26:57

His math has never penciled out. If you pull all of his old posts, the numbers are always changing. If it smells like a rat…

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Comment by Jingle Male
2013-08-11 06:30:07

I posted the sale I closed a month ago. Paid $296,000 in 2010, sold for $420,000. Cleared $90,000 on a $75,000 investment I made 3 years ago. Enjoyed some nice cash flow in the meantime.

Look it up for yourself.

Real estate can be a fantastic investment.

 
 
Comment by Jingle Male
2013-08-11 06:26:49

locallandlord says: “….20K cash flow on houses that cost 2.4 million? That’s 1%. Not good at all….”

7 houses produce about $185,000/year in income. That is a 7.7% multiple.

The cash flow in my pocket is $20,000/year after all the expenses.

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Comment by localandlord
2013-08-11 16:39:54

How much is your net cash flow not counting mortgage? Cash on cash. Take out for taxes, insurance, HOAs, short term maintenance, long term maintenance. The last one is harder because you have to calculate sinking money into a fund so it will be available for major repairs.

 
 
 
 
Comment by phony scandals
2013-08-10 11:46:05

“Don’t Be A Debt Donkey®”

But I have to pay taxes or I will go to jail.

 
 
Comment by phony scandals
2013-08-10 06:04:32

Watched the Fox Food Stamp show last night. Nothing shocking about the 29 year old surfer living the EBT life, $200 a month WTH. What was a little disturbing was the undoubtedly 6 figure Food Stamp recruiters (ACORN didn’t go away, they just changed the name) walking the streets to sign people up and the Spanish language radio Food Stamp soap operas that make up the “administrative costs equal about $5.5 billion per year, or about 10 percent of the value of food stamps distributed.”

By Andrew Montgomery on June 13, 2013

A report compiled by the Government Accountability Office (GAO) stated that, “the 18 food assistance programs show signs of program overlap, which can create unnecessary work and lead to inefficient use of resources.” Indeed, administrative costs equal about $5.5 billion per year, or about 10 percent of the value of food stamps distributed.

http://www.freedomworks.org/blog/andrewmontgomery39/top-10-reasons-food-stamps-need-to-be-reformed - 44k

Jason Greenslate – living the Ratt Life video

Jason Greenslate - Jeff Spicoli eats Sushi & Lobster off EBT cards
http://www.fireandreamitchell.com/2013/08/09/jason-greenslate-jeff-spicoli-eating-sushi-lobster-ebt-cards/ - -

Comment by homie don't play houses
2013-08-10 06:51:57

I haven’t seen it but kudo to fox I guess.

I need the conservatives and mouthpieces like fox, wsj, etc to air equally critical programs on the corruption and fraud in wallstreet and multinational corporations.

Comment by azdude
2013-08-10 07:11:57

living the CA dream.

Its amazing how many people are broke and going nowhere but feel special cause they reside in s cal.

Comment by Bill, just South of Irvine, CA
2013-08-10 07:29:28

Nah it’s just that too many graduated from the University of Spoiled Children. The weather is fine all the time, including during earthquakes.

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Comment by Whac-A-Bubble™
2013-08-10 08:08:19

Earthquakes are good for separating the true Californians from the pretenders and for helping to make California housing more affordable.

 
Comment by Bill, just south of Irvine, CA
2013-08-10 19:51:43

LOL PB!

 
Comment by Whac-A-Bubble™
2013-08-10 21:46:34

Another good mechanism for separating the real Californians from the wannabes: Riots.

Riots, arrests in California as Zimmerman protests turn violent (PHOTOS)
Published time: July 16, 2013 07:56
Edited time: July 17, 2013 10:19
Two men stand near a Los Angeles police officer during a protest against the acquittal of George Zimmerman in the Trayvon Martin trial in Los Angeles, California July 15, 2013.(Reuters / Jonathan Alcorn)

Police in Los Angeles and Oakland clashed with pockets of violent protesters intent on wreaking havoc following the verdict in a high-profile court case that saw the killer of a black youth declared ‘not guilty.’

A number of protesters were taken into police custody Monday night after the LAPD declared an unlawful assembly shortly before 10 pm on Monday night in the Crenshaw district.

The scene along Crenshaw Boulevard and adjacent streets was chaotic as rioters set fires, assaulted bystanders, and vandalized cars and businesses, authorities said.

Police estimated that up to 150 people were engaged in acts of civil disobedience in the Crenshaw area.

 
 
Comment by prayer walker
2013-08-10 07:32:05

broke and going nowhere but feel special cause they reside in s cal.

That’s so true.

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Comment by AmazingRuss
2013-08-10 09:58:58

“Its amazing how many people are broke and going nowhere but feel special cause they reside in s cal.”

It does have the ancient advantage that you can live outside and not freeze to death. If everything goes up in flames, that’s extremely valuable.

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Comment by rms
2013-08-10 15:25:18

“living the CA dream.”

Jason is not stupid.

Okay what if he finished school, then what? The system would suck him dry and piss away the money on the middle-east, and what’s left over Goldman Sachs and Obama would steal.

Yeah, he’s doing the right thing by putting himself first and living his life to the fullest. Why work at some job that will never afford him the chance to live near La Jolla, CA? Casual sexy beach babes? You betcha! We could all learn something from this guy. Rock on, Jason!

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Comment by phony scandals
2013-08-10 07:37:25

“I need the conservatives and mouthpieces like fox, wsj, etc to air equally critical programs on the corruption and fraud in wallstreet and multinational corporations”

Fox is just the “conservatives” bone to keep everybody fighting with each other while TPTB finish plundering the country.

His book, “The True Story of the Bilderberg Group,” was published in 2005 and is now updated in a new 2009 edition. He states that in 1954, “the most powerful men in the world met for the first time” in Oosterbeek, Netherlands, “debated the future of the world,” and decided to meet annually in secret. They called themselves the Bilderberg Group with a membership representing a who’s who of world power elites, mostly from America, Canada, and Western Europe with familiar names like David Rockefeller, Henry Kissinger, Bill Clinton, Gordon Brown, Angela Merkel, Alan Greenspan, Ben Bernanke, Larry Summers, Tim Geithner, Lloyd Blankfein, George Soros, Donald Rumsfeld, Rupert Murdoch, other heads of state, influential senators, congressmen and
parliamentarians, Pentagon and NATO brass, members of European royalty, selected media figures, and invited others - some quietly by some accounts like Barack Obama and many of his top officials.

Always well represented are top figures from the Council on Foreign Relations (CFR), IMF, World Bank, Trilateral Commission, EU, and powerful central bankers from the Federal Reserve, the ECB’s Jean-Claude Trichet, and Bank of England’s Mervyn King.

http://rense.com/general86/bilder.htm - 105k -

Eric Holder Admits Some Banks Are Just Too Big To Prosecute

Posted: 03/06/2013 3:29 pm EST

When the Attorney General of the United States admits some banks are simply too big to prosecute, it might be time to admit we have a problem — and that goes for both the financial and justice systems.

Eric Holder made this rather startling confession in testimony before the Senate Judiciary Committee on Wednesday, The Hill reports. It could be a key moment in the debate over whether to do something about the size and complexity of our biggest banks, which have only gotten bigger and more systemically important since the financial crisis.

http://www.huffingtonpost.com/2013/03/06/eric-holder-banks-too-big_n_2821741.html - 324k -

 
 
Comment by aNYCdj
2013-08-10 07:00:13

Ill go back to my original plan make all public assistance people sit in class at least 20 hours a week and learn English and math…….I’ll bet at least 1/3 will qit the first month

Then once they pass English then job training and not for menial work like scrubbing floors..

Comment by Skroodle
2013-08-10 10:31:33

qit - hahahahahahahaha!

 
 
Comment by phony scandals
2013-08-10 07:54:25

5 minutes of the recruiters.

Fox News Video: Inside the explosion of food stamp usage
http://video.foxnews.com/ - 36k -

 
Comment by phony scandals
2013-08-10 08:46:53

Brad Hamilton: Why don’t you get a job Spicoli?

Jeff Spicoli: What for?

Brad Hamilton: You need money.

Jeff Spicoli: All I need are some tasty waves, a cool buzz, my SNAP card and I’m fine.

Comment by phony scandals
2013-08-10 08:49:40

Jeff Spicoli: Hey, you’re ripping my card.

Mr. Hand: Yes.

Jeff Spicoli: Hey bud, what’s your problem?

Mr. Hand: No problem at all. I think you know where the employment office is.

Jeff Spicoli: [stunned] You dick!

Comment by phony scandals
2013-08-10 08:51:15

Mr. Hand: Where is Jeff Spicoli? I saw him earlier today, near the first floor bathrooms, is he still on campus? Anyone?

[Desmond raises hand]

Mr. Hand: Yes, Desmond?

Desmond: I saw him outside, near the food machines.

Mr. Hand: How long ago?

Desmond: Right before class.

Mr. Hand: All right. Bring him in.

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Comment by Carl Morris
2013-08-10 10:22:01

Nice :-).

 
Comment by Strawberry picker
2013-08-10 12:07:49

Hey, there’s no birthday party for me in here.

 
 
 
 
Comment by aNYCdj
2013-08-10 09:03:35
Comment by Skroodle
2013-08-10 10:33:13

Department of Agriculture.

Food Stamps are welfare for farmers. 1st primary is in Iowa. Connect the dots, food stamps are never going away.

Comment by phony scandals
2013-08-10 11:44:24

“Food Stamps are welfare for farmers”

Do farmers surf or add to the administrative costs of about $5.5 billion per year?

I know they can’t spell.

http://www.youtube.com/watch?v=vIJ_CL1mHYw - 110k

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Comment by Skroodle
2013-08-10 11:51:58

Yes, $20 billion a year goes in direct payments to farmers.

 
Comment by phony scandals
2013-08-10 12:15:47

“Yes, $20 billion a year goes in direct payments to farmers.”

Before I start searching could you tell me how and why $20 billion a year goes in direct payments to farmers? Is it for the food they grow or animals they raise? Is it to sit on their @ss and not grow food and raise animals? Is it $20 billion above what they make selling what they grow and animals they raise?

If so, why is anyone fighting not to cut the program? Because I thought just the $5.5 billion in administrative costs was plenty bad enough.

 
Comment by Whac-A-Bubble™
2013-08-10 13:14:31

Are we really talking about direct payments, or is it more a matter of welfare in the guise of a highly-subsidized government insurance program? If you don’t understand what this means, then try to shop for a car insurance program where they average amount you pay in premiums is far below the average amount the company pays out in claims.

 
Comment by Whac-A-Bubble™
2013-08-10 13:19:17

This all makes perfectly good sense, once you realize that today’s farm subsidy is tomorrow’s congressional campaign contribution.

Common Sense
Richer Farmers, Bigger Subsidies
By JAMES B. STEWART
Published: July 19, 2013
It’s hard to imagine a more widely reviled piece of legislation than the nearly $1 trillion farm bill. Its widely ridiculed handouts to wealthy farmers and perverse incentives have long united liberals concerned about the environment, conservatives upset about the deficit and market-distorting subsidies, and just about everyone concerned about basic fairness.
Stephen Crowley/The New York Times

Chris Chocola, president of the Club for Growth, said the generous benefits in the farm bill passed last week by the House made “absolutely no sense.”

Just about everyone, that is, except the powerful farm lobby and its allies in Congress, which every five years or so since the Depression has managed to fight off any meaningful reforms and actually increase farm subsidies.

And now they’re doing it again.

Last week House Republicans stripped the farm bill of its food stamp provisions, citing runaway costs and rampant waste and fraud in the $80 billion federal program. Fueling conservative outrage in Congress and the news media was a man who continued to collect food stamps after winning $2 million in the Michigan lottery two years ago.

But the bitter and much publicized debate leading up to the party-line vote tended to obscure what happened to the rest of the bill in the House: many of the same legislators up in arms about government spending and welfare abuse nonetheless voted for an increase in federal subsidies to wealthy farm interests.

What’s remarkable and extraordinary about the farm bill is that, at a time of record crop prices and federal deficits, the House overwhelmingly passed a bill to increase subsidies,” Scott Faber, vice president for governmental affairs at the Environmental Working Group, told me this week.

Only an evil genius could have dreamed this up.”

 
Comment by phony scandals
2013-08-10 13:48:27

Like flood insurance for rich people who live on the water?

 
Comment by Whac-A-Bubble™
2013-08-10 21:53:07

“Like flood insurance for rich people who live on the water?”

Same principle of insurance fraud is involved…

 
 
 
 
Comment by rms
2013-08-10 12:36:25

Watched the Fox Food Stamp show last night.

http://www.youtube.com/watch?v=R7OAmrQis0M

Comment by phony scandals
2013-08-10 13:52:42

U.S. National Debt Clock : Real Time
http://www.usdebtclock.org/ - 211k - Cached - Similar pages
US National Debt Clock : Real Time U.S. National Debt Clock.

Comment by ahansen
2013-08-10 15:21:34

SNAP is 67.4% of the Farm Bill Allocation.

A lot of that could be recouped if the food stamp program returned to actual surplus commodities giveaways instead of cash allowances for what amounts to packaging (of cheap foodstuffs).

A fifty pound sack of pinto beans or potatoes, a 10 pound block of processed “cheese food”, dehydrated and canned vegetables nearing expiration, culled fruits and salad greens, peanuts and peanut butter, margarine sticks, day-old breads, kool-aide and powdered milk.

Hard to game that on eBay…. There’s more to the program than meets the eye. Giant ag conglomerates have a vested interest in keeping the current SNAP program viable so they can move their crappy institutional “food” products to the poors.

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Comment by ahansen
2013-08-11 01:05:53

Nothing staged about that piece….

 
 
Comment by Blue Skye
2013-08-10 07:11:40

I met a couple in their 60s on the Canadian waterways. They had given up their retirement home to move to Kingston, so as to “help” their two sons. The boys are rising RE speculators and are buying up houses to rent and flip by the hundreds. Everyone wants to live in Kingston. There is a housing shortage in Kingston. Prices are high in Kingston.

Down along the shore a few miles is Toronto, from which a shock wave is emanating. Kingston just can’t feel it yet. More properties for sale along the Rideau waterfront than I have ever seen. Numerous whole islands for sale, which hasn’t been seen in my lifetime.

Comment by Whac-A-Bubble™
2013-08-10 08:15:52

“Down along the shore a few miles is Toronto, from which a shock wave is emanating. Kingston just can’t feel it yet. … Numerous whole islands for sale, which hasn’t been seen in my lifetime.”

Sweet! A tsunami wave of real estate price collapse is the first step towards regaining affordable home prices for young families.

Comment by Blue Skye
2013-08-10 08:32:03

It is amazing how many years they are behind while just a few miles away. So close yet so far.

Comment by Whac-A-Bubble™
2013-08-10 08:51:05

It must seem similar to municipalities surrounding Detroit who suddenly find they cannot issue debt at interest rates they are willing to pay?

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Comment by Whac-A-Bubble™
2013-08-10 08:54:08

CREDIT MARKETS
August 9, 2013, 7:21 p.m. ET
Muni-Bond Buyers Seeking Safety
Detroit Bankruptcy Prompts Some Investors to Shift Into Higher-Rated Segments of the Market
By KELLY NOLAN and MIKE CHERNEY
CONNECT

Investors in municipal bonds are turning to safer corners of the bond markets in the wake of Detroit’s bankruptcy filing.

A Detroit Fire Department station, above, is for sale. The city filed for bankruptcy protection in July.

Three weeks following the city’s filing with more than $18 billion in debt—which came after years of economic decline and population exodus—its impact is still being felt.

After at least three Michigan municipalities decided to postpone their bond sales, Detroit and Michigan officials insist the problems should be isolated to the beleaguered city. But the bankruptcy has prompted some investors to move their money into higher-rated segments of the municipal-bond market.

The new premium these investors demand from some debt tied to the state stems in part from their concern about officials’ insistence that Detroit bondholders should take losses on some of their debt and potentially agree to changes in terms on other debt.

Investors have yanked about $4.4 billion out of weekly reporting muni mutual funds in the three weeks following Detroit’s bankruptcy filing, according to Thomson Reuters unit Lipper FMI. During that same period, investors poured about $3.3 billion into corporate investment-grade funds, according to Lipper.

Detroit is “treating bondholders like the enemy,” said Dan Solender, director of municipal-bond management at Lord Abbett, who oversees about $17.5 billion in munis. And given that stance, “it’s harder to analyze risk” in the state, he said. He said his firm is being more cautious about investing in debt from Michigan local governments.

 
 
 
 
Comment by Whac-A-Bubble™
2013-08-10 08:30:00

Just checked San Diego MLS and FSBO listings on Redfin for the first time in a few months.

It seems like there are about 50% more listings than the last time I checked (6K-ish now versus 4K-ish this spring). This corroborates my wife’s comment to me last night that “there are a lot of homes on the market.” However, the overall number of listings is still near the lowest level in a decade, as listings in some of the pre-bubble collapse years exceeded 20K; I can’t help but suspect a bursting dam and flood lie in store at some point over the next few years.

The percentage of $1m+ listings has also dropped as more homes came on the market, from a level around 30% earlier this year to just north of 25%.

Total number of San Diego County houses, condos and townhouses for sale = 6170
$1m+ listings = 1574 (25.5%)

Comment by azdude
2013-08-10 08:59:22

yes I am noticing more homes come on market as prices go up.

Comment by Whac-A-Bubble™
2013-08-10 09:04:16

“…more homes come on market as prices go up.”

It’s a normal step in the progression towards the race-to-the-exit which always accompanies a bubble collapse.

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Comment by Skroodle
2013-08-10 10:34:17

Toronto is now the 4th biggest city in North America.

 
 
Comment by Whac-A-Bubble™
2013-08-10 08:05:30

Does anyone besides me find it highly curious how wealthy folks are giving the housing market a vote of confidence at the same time they are fleeing the stock market?

Market Snapshot
DJIA 15,425.50 -72.81 -0.47%
S&P 500 1,691.42 -6.06 -0.36%
Nasdaq 3,660.11 -9.02 -0.25%

Million Dollar Home Sales Jump in U.S. as Wealthy Return

By Kathleen M. Howley - Aug 8, 2013 11:24 AM PT
David Paul Morris/Bloomberg
A pelican flies by the gallery room of a 15,000 square-foot custom built home in Marin County, California.

Real estate has returned as a favorite topic of conversation at the pair of Starbucks Corp. (SBUX) coffee shops in Granite Bay, a Sacramento, California, suburb where the median income is double the rest of the state.

Home sales from Los Angeles to Charleston, South Carolina that are priced at more than $1 million are gaining at triple the pace of the broader market, according to real estate research firm DataQuick Inc. real-estate market.

“When the real estate market was booming, people sat in Starbucks and talked about how much they paid for a house,” said Craig Moe, who in June bought a $1.2 million property discounted 25 percent from its sale six years ago. “Now, they talk about how little they paid and what a bargain they got.”

Home sales from Los Angeles to Charleston, South Carolina that are priced at more than $1 million are gaining at triple the pace of the broader market, according to real estate research firm DataQuick Inc. Wealthy purchasers, helped by gains in equities, are diving into real estate a year after a recovery began in the housing market when less-well-heeled buyers rushed to take advantage of record-low interest rates, said Susan Wachter, a professor of real estate and finance at the University of Pennsylvania’s Wharton School.

“The real estate recovery has been built on purchases by middle-class families, even though they haven’t been the ones to flourish during the recovery,” she said. “Now, the economy is getting a vote of confidence from wealthy homebuyers.”

Sales of homes priced at more than $1 million jumped an average 37 percent in 2013’s first half from a year earlier to the highest level since 2007, according to DataQuick. Transactions priced at less than $1 million rose 11 percent in the same period to the highest since 2009, data from the National Association of Realtors show.

 
Comment by Whac-A-Bubble™
2013-08-10 08:12:01

With so much pessimism about an incipient end-of-QE3 stock market crash, wouldn’t the next logical move be UP?

Just in case, I plan to buy the dip.

U.S. Stocks Have Worst Week Since June Amid Fed Concern
By Lu Wang & Katie Brennan - Aug 10, 2013 7:40 AM PT

U.S. stocks fell for the week, with benchmark indexes posting the worst losses since June, as better-than-estimated data on trade and service industries fueled concern the Federal Reserve may reduce its stimulus.

JPMorgan Chase & Co. and Bank of America Corp. dropped at least 2.6 percent amid federal legal actions tied to their past mortgage-backed bond practices. Homebuilders tumbled 6.6 percent as a group amid concern rising interest rates and slow orders may continue to hurt the industry. International Business Machines Corp. slumped 3.8 percent to its 2013 low on signs of slowing demand for hardware. Tesla Motors Inc. and Groupon Inc. surged as results beat analyst estimates.

The Standard & Poor’s 500 Index dropped 1.1 percent to 1,691.42. The Dow Jones Industrial Average slid 232.85 points, or 1.5 percent, to 15,425.51. Both gauges capped their worst week since June 21 after closing at records on Aug. 2.

“There is still plenty of skepticism and anxiety in the market,” Hank Smith, who oversees $7 billion as chief investment officer at Radnor, Pennsylvania-based Haverford Trust Co., said by phone yesterday. “The uncertainty of when will the Fed taper? How much will they taper?” he said. “The market has come a long way this year. It will be interesting to see if investors take advantage of this pullback as they did clearly in the pullback in May-June.”

Comment by azdude
2013-08-10 09:01:19

Is is getting time for wall street to crash the market again?

Comment by Whac-A-Bubble™
2013-08-10 09:08:24

I think the standard operating procedure is to pump up prices to the point where Mom and Pop decide they have no choice but to either jump in or get left on the sidelines. At the point when almost everyone is buying stocks and chasing the market higher, the big boys dump their holdings and knock share prices back down to earth. At that point, too-big-to-fail Wall Street banks with access to the Fed’s discount window can borrow at near-zero rates and use the proceeds to snap up stocks at fire sale prices while ordinary American households are flat on their backs with high unemployment and ginormous investing losses.

This happened in the wake of the Fall 2008 crash, and unless it is different this time, I expect it will happen again soon. Get ready for QE4, folks!

Comment by azdude
2013-08-10 13:08:33

yep that’s a nice summary. exactly how its done.

If anything I would start shorting the market via etfs.

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Comment by AbsoluteBeginner
2013-08-10 21:04:22

‘If anything I would start shorting the market via etfs.’

Or start liquidating 401K equities for money market holding with every market rally day.

 
 
 
 
 
Comment by Whac-A-Bubble™
2013-08-10 08:21:33

Headline in the dead tree edition of the WSJ:

Stocks Start to Look Overcooked

I guess they had to whitewash the colorful choice of wording for the online version so as to not panic the masses?

MARKETS
August 8, 2013, 8:15 p.m. ET
Stocks Start to Look Overvalued
Stocks in S&P 500 Are at Highest Price/Earnings Ratio in Nearly Four Years
By ALEXANDRA SCAGGS
CONNECT

For the past several years, stock-market bulls have been able to argue that stocks are cheap. That argument is increasingly on shaky ground.

In recent weeks, the S&P 500 index has pushed further into record territory. But those gains have come as profit growth has stalled.

As a result, stocks in the S&P 500 are at their highest price/earnings ratio in nearly four years, and above their average multiple of the past 10 years.

That has some investors becoming more cautious.

“Valuations have gotten ahead of fundamentals,” said Michael McGarr, portfolio manager for the Becker Value Equity Retail Fund, which manages $202 million. “With valuations up here…there is some vulnerability in the market.”

 
Comment by Whac-A-Bubble™
2013-08-10 08:47:56

One thing which has mystified me ever since I moved to San Diego County near the peak of the Housing Bubble has been the dearth of used homes on the market, a situation which did not change much after the 2007-08 financial collapse. The county has over 3m residents and 1m houses, yet the most homes I have ever seen listed for sale at one time was 20K (roughly 2% of the entire housing stock); current listings are around 6K (0.6% of the stock).

San Diego County has an aging population, plus lots of churn due to families going broke in the face of unaffordable living expenses (no exaggeration here — I’ve personally helped a number of these families pack up their households to move away). One would expect more supply on the market given the demographic forces in play.

The mystery begins to clear up upon reading about the hordes of all-cash investors who swoop down on SoCal from other countries to buy investment properties. Further insight is obtained upon talking to your friends and colleagues, only to realize that a substantial percentage of San Diego residents have a sideline as real estate investors with mini-Trump holdings of multiple individual residential properties. I guess there is nothing wrong or illegal about this. But I grew up in another part of the country where one house to one family was the norm*, so the idea of owning multiple houses on the presumption that real estate ownership is the path to riches seems very peculiar to me.

* As I typed this, the plight of Lil’ Sis and her husband, who currently own three houses in Flyover Country, came to mind. Perhaps ownership of more than one home per household among those who can “afford” it is a transient anomaly of the Housing Bubble era?

Comment by Skroodle
2013-08-10 10:35:22

Prop 13 also reduces the number of homes for sale.

 
Comment by ahansen
2013-08-10 15:26:08

Naval brass, weapons research and brokerage, bio-research corporations and international smuggling provide ample cash flow for an ever-churning house buyers/leasers market.

Comment by Whac-A-Bubble™
2013-08-10 21:50:11

Your point is taken concerning a limited portion of the San Diego market (say the $1m+ segment), though even that has its issues regarding the leading edge of the Baby Boom generation cashing out in the face of shrinking demand. Put simply, there are too many $1m+ homes for the prospective number of $1m+ buyers.

 
 
 
Comment by Whac-A-Bubble™
2013-08-10 08:55:16

How is the eminent domain battle between the Richmond City Government and the real estate industrial complex shaping up?

Comment by Whac-A-Bubble™
2013-08-10 09:32:35

Will some of the largest, most powerful financial investment firms in the world succeed in their lawsuit against this poor minority community? It’s like a reenactment of the Old Testament story of David and Goliath.

Since Fannie Mae and Freddie Mac are on the brink of getting dismantled, I’m a bit surprised they have the wherewithal to pile on in a lawsuit against tiny Richmond.

City of Richmond to Fight Lawsuit Over Eminent Domain Plans
August 9, 2013, 9:52 am • Posted by KQED News Staff and Wires
Email Share Twitter Facebook 1 Comment
Richmond could be the first city to use eminent domain to address its housing crisis. (Justin Sullivan/Getty Images)

The City of Richmond is preparing to fight a lawsuit over its plans to save more than 600 homes with troubled mortgages by taking them through eminent domain.

The law firm Ropes & Gray filed the suit in federal court in San Francisco Wednesday on behalf of Wells Fargo and Deutsche Bank, calling the city’s move unprecedented and unconstitutional. The banks represent the bond investors, including government-backed mortgage agencies Fannie Mae and Freddie Mac, holding the mortgages.

Richmond wants to refinance the loans under terms that the homeowners can afford. Mayor Gail McLaughlin says the city is acting on behalf of its struggling residents.

“We think that what the banks are doing is without merit,” McLaughlin says. “We do not fear the public courtroom, and we believe our legal reasoning will prevail outside the courtroom and inside the courtroom.”

The plantiffs say the move will benefit only a small group of Richmond locals and the San Francisco investment firm that’s helping the city.

If Richmond is successful, it will be the first city to use eminent domain to address its housing crisis. Eminent domain is a municipal power usually reserved for purchasing land for public use, such as sidewalks or parks.

Comment by Whac-A-Bubble™
2013-08-10 09:48:04

Here’s to hoping the City of Richmond can find a lawfirm which can successfully defeat the Ropes & Gray carpetbaggers. (I don’t have a dog in the fight…just like to see the high and mighty go down in defeat!)

 
Comment by Skroodle
2013-08-10 10:37:48

Note that most of the mortgages are current, just in “trouble”.

What is the legal definition of a troubled mortgage?

Comment by Whac-A-Bubble™
2013-08-10 13:06:55

Present value of amount owed > current market value of collateral.

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Comment by Whac-A-Bubble™
2013-08-10 13:09:51

To be quite honest, I don’t really understand the city’s position. These homeowners contractually agreed to borrow money and repay it over time with interest. What gives the Richmond city government the legal right to override private contracts?

 
Comment by Skroodle
2013-08-10 16:30:19

Announcing a condemnation of a neighboorhood would drive all the buyers away and destroy the current market value.

Could work any city.

 
 
 
 
Comment by Whac-A-Bubble™
2013-08-10 09:45:20

Bloomberg: We can’t let the Richmond, CA eminent domain plan prevail, because it would scare away the investors who buy MBS at historically high valuations, thereby enabling U.S. homebuyers to purchase homes financed by historically-low mortgage rates.

REALLY? Why would the Fed be scared off by this development?

Don’t Condemn Underwater Mortgages. Renegotiate.
By the Editors Aug 9, 2013 9:06 AM PT

From a casual reading of real estate news, one might conclude that the U.S. housing bust is over. Nationally, home prices have risen for 16 months straight, and are about where they were in 2004.

But for 9.7 million homeowners, happy times aren’t here again. Those are the wretched borrowers — almost 20 percent of households with a mortgage — who owe more than their homes are worth. Their negative equity totals $580 billion.

That sum is suddenly the object of a battle royale. On one side are the biggest U.S. banks, the bond market and the real estate industry. On the other are those underwater homeowners, a couple-dozen communities where they mostly reside and a San Francisco venture-capital firm, Mortgage Resolution Partners LLC, proposing what it claims is the ideal fix, in three easy steps.

Step one: Cities invoke eminent domain to seize underwater mortgages embedded in investor-owned bonds. Step two: Using private money, cities pay off the investors on those loans at a discount on their face value. Step three: The mortgages are refinanced with smaller loans, turning the negative into positive.

All this is the brainchild of Cornell law school professor Robert Hockett, who outlined the plan in a Federal Reserve Bank of New York paper. His logic is sound enough: Negative-equity households would be discouraged from defaulting; banks and bondholders would save money in the long run by avoiding foreclosures and short sales. Housing dead zones such as Richmond, California, a blighted, blue-collar city of about 106,000 on the east side of San Francisco Bay — and the epicenter of this fight — might even spring back.

Trapped Homeowners

Richmond wants to be the first to use eminent domain this way. Many of its residents are out of work — the unemployment rate is above 11 percent — and trapped. They can’t take jobs elsewhere because they can’t sell their homes or refinance at today’s low rates. As of May, 2,759 owners had negative equity, according to CoreLogic Inc.

But eminent domain is a powerful tool, and should be used sparingly. It wouldn’t serve the U.S. well if this gambit frightened off the steady stream of investors needed to purchase the mortgage securities that allow homebuyers to borrow at attractive rates.

 
 
Comment by Whac-A-Bubble™
2013-08-10 09:19:46

This seems so silly. Given the secrecy of NSA surveillance programs, this announcement could be made with absolutely no change in top secret surveillance measures to monitor innocent American citizens. Spook contractors with just a high school education can continue pulling down north of $120K a year to spy on ordinary Americans, with nobody outside surveillance program insiders able to tell the difference.

POLITICS
Updated August 9, 2013, 4:15 p.m. ET
Obama Proposes Surveillance-Policy Overhaul
President Plans Changes to Foreign Intelligence Surveillance Court
By SIOBHAN GORMAN, CAROL E. LEE and JANET HOOK
CONNECT

In a news conference on Friday, President Barack Obama announced plans to take measures to increase transparency on government surveillance programs. He also said the government is “not interested in spying on ordinary people.”

WASHINGTON—In a striking policy shift that ensured the rancorous spy-policy debate would extend into the fall, President Barack Obama announced plans to overhaul key parts the National Security Agency’s surveillance programs.

The proposal—an extraordinary step in the face of this year’s revelations from fugitive NSA leaker Edward Snowden—drew sharp responses from Republican lawmakers who suggested the president was retreating under political pressure. The tone of the reaction from Republicans and skeptical Democrats suggested Mr. Obama has a new fight on his hands, reminiscent of the two-year battle that preceded reforms of the surveillance law in 2008, during the George W. Bush administration.

Comment by Skroodle
2013-08-10 10:39:30

Obama is becoming more like Nixon every day.

I expect him to claim -”I am not a crook!”.

 
 
Comment by Whac-A-Bubble™
2013-08-10 09:51:43

When will U.S. authorities stop picking on the small fry and bring the financial crime syndicate kingpins to justice?

Comment by Whac-A-Bubble™
2013-08-10 09:53:42

Sources: U.S. considering arrests in JPMorgan ‘whale’ case
Feds to arrest two Ex-JP Morgan traders in London
The entrance to JPMorgan Chase’s international headquarters on Park Avenue is seen in New York (Shannon Stapleton Reuters, REUTERS / October 2, 2012)
Emily Flitter and Matthew Goldstein
7:00 a.m. CDT, August 10, 2013

NEW YORK (Reuters) - U.S. authorities are considering arresting two former JPMorgan Chase & Co employees for their alleged role in masking $6.2 billion “London Whale” losses, according to two people familiar with the situation.

In the latest twist in a scandal that has tainted the reputation of the largest U.S. bank and led to calls for greater oversight of its chief executive, Jamie Dimon, the main target of the investigation is Javier Martin-Artajo, who worked in London as the direct supervisor of Bruno Iksil, the trader who became known as “the London Whale,” the sources said.

Comment by Skroodle
2013-08-10 10:41:58

The FBI should just move a couple of hundred agents to the UK to enforce US laws. I bet a lot of UK residents are not aware of the US laws they are breaking every day.

Comment by Whac-A-Bubble™
2013-08-10 13:05:49

Why would they bother trying to hunt down Wall Street criminals across the pond? Has Wall Street been relocated from Manhattan to London?

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Comment by Whac-A-Bubble™
2013-08-10 09:57:25

Tourre Juror: ‘We Saw Goldman As The Bigger Problem’
by Lisa Chow
August 09, 2013 3:07 AM
4 min 42 sec

Fabrice Tourre, outside the courtroom. “We didn’t feel any malice toward him,” one of the jurors said.
Richard Drew/AP

Beth Glover was a juror on the trial of former Goldman Sachs trader Fabrice Tourre. When the lawyers were discussing the mortgages tied to the securities at the center of the case, Glover realized that, for all intents and purposes, they were talking about her mortgage.

When they were looking at the subprime mortgage groupings, I think I would have been in one of those,” Glover told me. “I didn’t have as great as FICO score at that time.”

Glover’s an Episcopal priest. She says she saw the devastation the financial crisis caused to her parishioners. They lost homes and jobs. Church programs had to be cut for lack of funds.

Another juror I spoke with, Dylan Maxwell, said he might still be underwater on his mortgage. (He hasn’t checked recently.) But, he says, when it came time to deliberate, it was not Wall Street on trial. It was just Fabrice Tourre.

We didn’t feel any malice towards him. We felt sympathy at times,” Maxwell told me. “We saw Goldman as the bigger problem. And the whole system as a bigger problem.”

Glover agrees. She said she’d like to see some of the people above him put on trial. Tourre seemed to her like a scapegoat.

The problem with just going after Fabrice Tourre or going after the different sort of Fabrice Tourres that are in all of these banks is that it doesn’t change the system,” she told me. “At least not enough.”

Comment by Prime_Is_Contained
2013-08-10 10:11:00

“We saw Goldman as the bigger problem. And the whole system as a bigger problem.”

Fascinating.

So no one ends up paying any penalties at all—because jurors recognize that the little guy is just a scapegoat, and those with the power to indict higher up the food-chain refuse to exercise it.

Comment by Strawberry picker
2013-08-10 10:34:40

Just some stupid SEC civil case, not a criminal case? Ooh my arm, I think it’s broken.

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Comment by Skroodle
2013-08-10 10:43:32

Just another show trial.

 
 
Comment by Neuromance
2013-08-10 16:34:17
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Comment by phony scandals
2013-08-10 11:53:31

Would someone post this for me Wednesday morning?

http://www.youtube.com/watch?v=kWBhP0EQ1lA - 188k -

 
Comment by phony scandals
2013-08-10 13:16:40

Posted: 6:02 a.m. Saturday, Aug. 10, 2013

Obama: Time to turn the page on housing woes

NewThe Associated Press

WASHINGTON —
President Barack Obama says the housing market is healing, but it’s time to turn the page on the “bubble-and-bust mentality” that led to the market’s collapse.

In his weekly radio and Internet address, Obama calls on Congress to let all Americans refinance at current low rates. He wants more help for first-time homebuyers and expanded affordable rental housing. He’s proposing to phase out mortgage giants Fannie Mae and Freddie Mac so private capital can play a bigger role in mortgages.

At the same time, Obama says the U.S. must preserve access to popular 30-year mortgages.

Comment by Whac-A-Bubble™
2013-08-10 14:33:24

“He’s proposing to phase out mortgage giants Fannie Mae and Freddie Mac so private capital can play a bigger role in mortgages.”

How will Uncle Sam blow massive taxpayer-funded subsidies into the housing market if Fannie Mae, Freddie Mac and QE3 are all wound down?

 
Comment by Whac-A-Bubble™
2013-08-10 14:39:38

I guess it all gets down to keeping the taxpayer-insured mortgage guarantees going, whether or not provided by Frannie Mac.

WALLISON: Obama’s next housing boom and bust
President’s plan will repeat the mistakes of Fannie and Freddie
By Peter J. Wallison
Thursday, August 8, 2013

It would be funny if it weren’t so serious. The president has proposed to eliminate Fannie Mae and Freddie Mac, while at the same time proposing to put in place the same policies that caused the two government-sponsored enterprises to fail.

At some point, we have to choose. Either we will have a government-controlled market or a private market. The president says he wants the government to have a limited role — mostly, it appears, providing what he called “catastrophic guarantees.”

Even if you’re the president, you can’t square the circle. Once the government is providing catastrophic guarantees, it means that the investors who buy mortgages or mortgage-backed securities will be protected against loss. Either they will be paid by the private sector, or they will be paid by the government’s catastrophic guarantee. That means they won’t be interested in whether the mortgages are good quality: Even if they’re not, these investors will be paid.

That’s where we started with Fannie and Freddie. They were known to be backed by the government, so investors didn’t care whether the mortgages they acquired were safe and sound. Investors knew this didn’t matter, since the government would bail them out. When low-quality mortgages made Fannie and Freddie insolvent, sure enough, all the investors in their mortgage-backed securities were paid. The taxpayers were handed the bill.

Now, the White House fact sheet goes on to explain that private capital would take most of the burden, to protect the taxpayers. However, if the private sector is going to take most of the burden, it will want to be sure that the mortgages are of good quality, made to people with good credit records, who can make solid down payments and will not be stretched financially after they have assumed the obligation of the mortgage.

Once again, the issue is the quality of the mortgages. We have now established that because of the government’s catastrophic guarantees, the holders of the mortgages or the mortgage-backed securities will not care whether the mortgage is of good quality. So, if the private sector is going to take responsibility in some way for the quality of the mortgages, how will it do that?

The obvious way is to charge for the risks that the mortgage creates. In other words, if the borrower does not have a good credit score or a down payment, the mortgage would cost more. But here’s where the scheme runs into trouble. The data shows that if a mortgage is not a prime mortgage — that is, if the borrower doesn’t have a good credit score or a down payment, or both, those mortgages have high rates of default. That’s what put Fannie and Freddie under. Some of the mortgages they were buying had rates of delinquency between 13 percent and 17 percent. To protect against that, the private sector will have to do one of two things: refuse to make those mortgages or impose hefty finance charges.

Congress is not likely to stand idly by while a mortgage system that the government is backing is turning down low-income borrowers — the very people who frequently have low credit scores and cannot afford substantial down payments. So Congress will come up with a way to make sure that as many people as possible have access to this government program.

Comment by azdude
2013-08-10 16:13:07

the system relies on rising home prices and inflation. Wages are not going up in a lot of professions. people are dropping like flies from middle class.

 
 
Comment by Neuromance
2013-08-10 16:38:21

President Barack Obama says the housing market is healing, but it’s time to turn the page on the “bubble-and-bust mentality” that led to the market’s collapse.

I remember the flood of quotes around 2008 from top financial executives and financial media, about how bubble and bust were perfectly normal, just another ho-hum day at the office.

They had a merry olde time turning their “products” into currency, at the expense of the taxpayers.

 
Comment by Strawberry picker
2013-08-10 20:19:46

WHY DO THIS IF THE PRICES ARE RISING BACK TO BUBBLETIME LEVELS??????

 
Comment by Whac-A-Bubble™
2013-08-10 23:42:37

Barron’s Cover | MONDAY, JULY 29, 2013
Fannie, Freddie: On Borrowed Time
By JONATHAN R. LAING | MORE ARTICLES BY AUTHOR
Investors must realize the mortgage giants aren’t coming back to life. And home buyers should understand the alternatives will charge more.

Even after their financial collapse and massive taxpayer-funded bailout, Fannie Mae and Freddie Mac are still the colossi of the U.S. home-mortgage market. They own or guarantee repayment on more than half of the system’s $10 trillion in outstanding mortgage debt. More astonishing, these agencies are making money again — lots of it — under tightened government supervision and aided by strengthening home prices. Once their second-quarter numbers are released, they will show that the duo will have returned in dividends about $131 billion of the $187 billion that the government had to infuse into them following their September 2008 seizure.

The recent news from the two has been so encouraging that their delisted common shares are up about 500%; the price of their preferred stock has gained about 200%, as opportunistic hedge and mutual funds wager that the two will survive — albeit heavily reorganized and privatized — and eventually offer the kinds of big share payouts that investors reaped from American International Group (ticker: AIG), among other casualties of the financial crisis.

Don’t bet on it. There is little appetite in Congress or elsewhere to permit the two government-sponsored enterprises (GSEs) ever again to exploit their federal charters, with the cheaper borrowing costs and implicit government backstop of their obligations, to enrich shareholders and leave the American taxpayers to pick up the pieces when the model blows up. Two legislative proposals have emerged in recent weeks, one in the House and one in the Senate, that call for the agencies’ operations to be wound down, their charters revoked, and their remaining assets sold off in the ignominy of a receivership. In any event, it’s highly unlikely that the common or preferred shares hold any lasting value.

While the process will take some time, since no final legislation is likely to emerge until after the 2014 midterm elections, what is more probable than Fannie or Freddie’s revival is the emergence of a hybrid American mortgage system in which the government has a lesser but continuing role as guarantor. The private sector will play a bigger part, but will also have to assume more risk. One result for prospective homeowners: The rate for a standard mortgage will be higher, possibly a half percentage point or more than under the current system.

 
 
Comment by Bubbabear
2013-08-11 10:59:20

A country song about monetary policy, written and performed by Merle Hazard.

http://www.youtube.com/watch?v=hj86YsaoCtw&feature=player_embedded#at=135

 
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