September 20, 2013

The Unwinding Of Unsustainable Speculative Positions

It’s Friday desk clearing time for this blogger. “If you see a Houston realtor with a big grin on his or her face, they’ve probably just cashed their commission check for August. The Houston Association of Realtors is posting sales figures for the month, making for a 27th consecutive month of gains in the market. The reason realtors are smiling is because of the dollars generated by the sales of over 8,900 units. ‘Total-dollar volume soared nearly 36% to $2.2 billion,’ says HAR Chairman Danny Frank. ‘Last August, total sales generated $1.6 Billion. This has definitely been a summer sales season unlike any we have seen before,’ he says.”

“U.S. home sales in August rose to their highest level in six years, even higher than during the recent home buyer tax credit. Still, Realtors were uncharacteristically pessimistic in their predictions for sales this fall. ‘We are getting early signals from lock boxes that show a significant change in direction in August,’ said Lawrence Yun, chief economist for the National Association of Realtors, referring to the small key boxes that hang on the doors of for-sale homes. The number of times they were opened in August dropped dramatically, signaling a big drop in potential buyer traffic.”

“After years of stagnant home prices throughout Riverside and San Bernardino Counties all signs are pointing to a housing market recovery. But who is benefiting? ‘Sellers,’ says realtor Doug Shepard. Low housing inventory has made it difficult to find the right house for a buyer. ‘You’re not going to see us crying in the streets, but it can be tough,’ said Shepard. ‘We only make money when a home gets sold.’”

“‘What’s troubling is the recovery doesn’t happen at the same rates for everyone,’ said UCR professor Vanesa Estrada. ‘Inequalities that were already there are being exacerbated.’ Christopher Thornberg, one of the founders of Beacon Economics in Los Angeles, vehemently disagrees with Estrada. ‘Everybody,’ declared Thornberg when asked who is benefiting. ‘Listen to me, everybody.’ He said housing sales are also helping people who are underwater get some of the equity in their homes back which is spurring the overall economic recovery. ‘You don’t have to worry about housing,’ said Thornberg.”

“Ever wondered why, in the face of a sharp inventory shortage, new home construction still lags so far behind other housing indicators? Two reasons, according to Trulia Chief Economist Jed Kolko: 1) Because household formation, which fuels demand, is only half its normal rate. 2) Because, despite a supply shortage, the vacancy rate remains elevated, thanks to a glut of unlisted vacant properties, many of them foreclosures. The market does not have a housing shortage, just a shortage of for-sale listings. ‘Many of those vacant, off-market homes could come onto the market, especially if their owners are just waiting for prices to rise enough to make selling worthwhile,’ Kolko wrote in a blog post.”

“The Federal Reserve’s surprise announcement that it would not taper its economic stimulus program this month is rattling through world markets. But one of the biggest and direct impacts could be on the housing market. The longer-term effects, notes David Berson, former chief economist at mortgage lending giant Fannie Mae, are difficult to guess, because this housing recovery is unlike any that have come before.”

“‘Usually housing, because it’s so rate-sensitive, it tends to recover first,’ he says. The pickup in existing homes has previously been followed closely by new construction and jobs, but this time, ‘housing starts haven’t picked up that much. The overall impact has been muted because there were still large numbers of vacant homes.’”

“After signaling his faith that real estate could weather increasing home-loan rates in June, Fed Chairman Ben S. Bernanke opted to exercise caution in reducing support for the economy. He said yesterday at a news conference in Washington that policy makers are seeking more information on how higher borrowing costs are affecting the housing recovery. Fed officials ‘finally realized that housing is fading in anticipation of the tapering and even higher rates, and that they could not do it without irreparable damage to the housing recovery,’ said Robert Bostrom, a former general counsel at Freddie Mac.”

“Weekly applications to refinance mortgages have slumped 66 percent from a 2013 high, according to Mortgage Bankers Association data released yesterday. Investors also funded $554 billion of government-backed home loan securities and $86 billion slices of repackaged mortgage bonds through short-term loans in the tri-party repurchase agreement market as of Aug. 9, according to monthly data from the New York Fed. Real-estate investment trusts that rely on the borrowing owned $343 billion of the securities on March 31, while commercial banks, whose deposit costs are also tied to the Fed rates, now hold more than $1.3 trillion, central bank data show.”

“‘Ability to fund cheaply remains critical for these levered carry trades,’ as well investments often made by hedge funds known as inverse interest-only notes, the BNP analysts wrote.”

“In his post-FOMC press conference, Fed Chairman Ben Bernanke made it clear that he had lost control of the market, causing a tightening of financial conditions that directly hit the highly supported housing market through higher mortgage rates. Bernanke lied. At one point, the Chairman of the Federal Reserve told reporters: ‘we are somewhat concerned. I don’t want to overstate it. But we do want to see the effects of higher interest rates on the economy, particularly mortgage rates on housing.’ Yet Bernanke, and the rest of the FOMC, are gravely concerned.”

“As I previously reported: ‘In the three months since the June FOMC meeting where tapering was formally introduced, the yield on 10-year Treasuries has jumped more than 70 basis points, increasing ‘by a greater amount than during the entire previous interest rate tightening cycle between June 2005 and June 2006,’ Tradeweb’s analysts explained. This tightening hit homeowners where it hurt. Goldman’s data showed that as rates on 30-year fixed mortgages rose 1.2 percentage points since May, the monthly mortgage payment for a median-priced home with a 20% down payment rose by $110. ‘The Fed is particularly sensitive to the rise in mortgage rates given the special effort it has devoted to supporting the housing market through its credit easing policies (MBS purchases),’ explained Goldman’s team.”

“The minutes from the FOMC’s July 30-31 meeting reveal central bankers’ concern about the market’s reaction to a potential reduction in stimulus. ‘Some participants felt that, as a result of recent financial-market developments, overall financial-market conditions had tightened significantly,’ according to the minutes, which were released Aug. 21. They ‘expressed concern that the higher level of longer-term interest rates could be a significant factor holding back spending and economic growth.’”

“At the same time, ’several others’ at the July gathering said an easing in bank lending standards would ‘largely offset’ the impact of rising interest rates. ‘Some participants’ also said the move may have ‘helped put the financial system on a more sustainable footing’ by prompting the ‘unwinding of unsustainable speculative positions.’”

“Why would the Fed know that the capital markets were fully prepared to absorb a $10 billion tapering of this bond buying, and then not even do that? The Fed knows that the day of reckoning has to come. No ‘housing recovery’ can be considered real when it cannot even sustain the modest tapering of a bizarre Fed bond-buying program. The tool the Fed is holding on to for dear life is whatever will work to provide the appearance of health and momentum in the housing market. So as we sit here on the fifth anniversary of ground zero to the biggest financial crisis since the Great Depression, one caused by a cult of housing market obsession.”

“The media would have portrayed the taper, if it had happened, as a tightening exercise. That’s how low the expectations of the media have been set by central banks – not only by the US Fed, but also by its counterparts in other parts of the world. Most central banks, including our own RBI, are running massively accommodative policies whose deleterious effects have only just started playing out. And yet, all that we can hear in terms of expectations from the government, industry bodies and the media channels are requests for further easing.”

“So what should Bernanke have done? Bernanke should never have lowered the rates to zero in the first place and indulged in this exercise of bond buying. It was the monetary easing by the previous Fed Chairman, Alan Greenspan, that led to the housing bubble with all the accompanying imbalances in the US economy. This round of easing has been greater, by a wide margin at that, and so the consequences are going to be that much worse than in 2008 when the current bubble in treasuries/ bonds, fiat currencies and ‘confidence in governments’ bursts.”

“As Ludwig von Mises of the Austrian School would love to compare, any economy on a central bank-induced cheap credit binge is like a drug addict… with time, one needs greater and greater dosages to even maintain the status quo. Any cleansing process of this addiction has to start with the rather painful, but much needed, withdrawal symptoms.”

“The path that Bernanke has put the US on is very different. He has taken the route of greater doses of stimuli that would allow him to temporarily postpone the withdrawal symptoms, but would ultimately cause the death of the patient.”




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65 Comments »

Comment by Whac-A-Bubble™
2013-09-20 05:57:45

“‘We are getting early signals from lock boxes that show a significant change in direction in August,’ said Lawrence Yun, chief economist for the National Association of Realtors, referring to the small key boxes that hang on the doors of for-sale homes. The number of times they were opened in August dropped dramatically, signaling a big drop in potential buyer traffic.”

The Housing Bubble’s denouement has alternated between periods when Realtors® were able to successfully capitalize on various government interventions to beat a new group of buyers out of the bushes, and hangovers in the aftermath of the latest round of beatings, such as the one Yun anticipates for this fall.

Sadly, it is only possible to beat a dead horse so many times before it will no longer get up and walk again.

Comment by azdude02
2013-09-20 06:49:00

seasonal slowdown? Bernake will keep printing and propping up assets until it simply doesn’t work anymore. Law of diminishing returns.

Bernakes prints = input

stock and home values = output

Bernakes spends 1 dollar and gets “y” dollars in asset value.

Get on the gravy train and join the casino.

Comment by Whac-A-Bubble™
2013-09-20 06:56:06

“Bernakes prints = input

stock and home values = output”

That model may work great in the short run.

In the long run it’s dead.

Comment by azdude02
2013-09-20 06:58:59

in the long run your in the ground?

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Comment by Whac-A-Bubble™
2013-09-20 07:05:07

I expect this bubble to be in the ground before most HBB posters.

 
Comment by Housing Analyst
2013-09-20 07:06:14

It’s not working so well anymore now is it? ;)

 
Comment by Whac-A-Bubble™
2013-09-20 07:17:57

The MSM has pulled away the Fed’s curtain and is actively analyzing the technique used to pull all the levers. You can stick a fork in the Echo Bubble at this point.

“The Fed knows that the day of reckoning has to come. No ‘housing recovery’ can be considered real when it cannot even sustain the modest tapering of a bizarre Fed bond-buying program. The tool the Fed is holding on to for dear life is whatever will work to provide the appearance of health and momentum in the housing market. So as we sit here on the fifth anniversary of ground zero to the biggest financial crisis since the Great Depression, one caused by a cult of housing market obsession.”

“So what should Bernanke have done? Bernanke should never have lowered the rates to zero in the first place and indulged in this exercise of bond buying. It was the monetary easing by the previous Fed Chairman, Alan Greenspan, that led to the housing bubble with all the accompanying imbalances in the US economy.”

 
Comment by snake charmer
2013-09-20 11:55:24

We’re hooked on it now, and a lot of things are going to fall apart before this ends. And the ending may be involuntary.

I’m amazed that so many stories about this begin with the word “surprise.” I wasn’t surprised at all. This Fed announcement looked remarkably like the last ten, which will look like the next ten.

 
 
Comment by Blue Skye
2013-09-20 07:38:40

This is what deflation looks like with Federal Reserve intervention. Fed intervention doesn’t stop deflation, it only increases the sweeps from the debtors toward the lenders. It sweeps up more and more debt that cannot be repaid by people earning less and less.

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Comment by Housing Analyst
2013-09-20 07:47:42

That’s spot on. That’s precisely what we’re seeing….. more dumb. borrowed. money. committing financial suicide. That’s it. Nothing more.

 
 
 
 
Comment by Housing Analyst
2013-09-20 07:19:29

(fun)Yun’s @ss covering is always fun to read about.

Have we not already determined that what few sales that were occurring hit a wall?

Remember…. Housing demand is at 14 year lows and falling.

 
 
Comment by Whac-A-Bubble™
2013-09-20 06:21:56

“…all signs are pointing to a housing market recovery. But who is benefiting? ‘Sellers,’ says realtor Doug Shepard. Low housing inventory has made it difficult to find the right house for a buyer.”

That is spot on! The inventory drought (i.e. choice of homes available for sale) makes this a historically bad time for consumers to shop for a home to purchase. The market is stacked in favor of wealthy owners, including sellers. The Fed’s taper delay will serve to spike the low-mortgage-rate punchbowl one more time, tempting another wave of buyers to hunt high and low through depleted for sale inventory for one they can “afford” on a low monthly payment with high purchase price.

Conversely, it is a great time to sell. 30-year rates hit a two-year high of 4.58% on August 22, but have subsequently dropped. And they will drop further, thanks to the QE3 taper head fake, giving sellers a shot in the arm with respect to the number of prospective buyers who can qualify at a given wishing price.

I’m going to point this out to my buddy who is trying to sell a condo — the 10-year Treasury yield dropped around 10 basis points on the taper postponement news. A similar drop in 30-year mortgage rates would potentially increase the purchase budget for folks who might want to buy his condo by 1%+. Assuming his condo will sell for north of $300K, the Fed probably just helicopter-dropped $3K+ in personal stimulus into his pocket!

The old advice from the Romans to prospective Ownership Socieity members applies now as much as ever:

CAVEAT EMPTOR!

Comment by Whac-A-Bubble™
2013-09-20 06:41:13

“‘Everybody,’ declared Thornberg when asked who is benefiting. ‘Listen to me, everybody.’”

It’s sad when a former beacon slides into pimpdom.

 
Comment by NihilistZerO
2013-09-20 13:32:58

“Conversely, it is a great time to sell…”

Not for much longer. Their are to few lemming 30 year debtors relative to potential sellers just coming above water. They’ve only got maybe a year window before all the REO2Renters and Blackstone’s of the world see their models destroyed and values plummet, again.

I honestly don’t think it’ll be as bad as 2008 as the FED has become THE “bad bank”. The MBS and Treasuries they’ve been buying with their Monopoly Money Fiat we’re never meant to be repaid. Life and the FED con go on…

 
 
Comment by Amazed415
2013-09-20 06:41:57

“‘What’s troubling is the recovery doesn’t happen at the same rates for everyone,’ said UCR professor Vanesa Estrada. ‘Inequalities that were already there are being exacerbated.’ Christopher Thornberg, one of the founders of Beacon Economics in Los Angeles, vehemently disagrees with Estrada. ‘Everybody,’ declared Thornberg when asked who is benefiting. ‘Listen to me, everybody.’

Meanwhile in other news, Christopher Thornberg has opened a Kool-aid stand outside his offices on West Century Blvd in Los Angeles. Business is brisk, he said. But then again, I only talk to rich people.

Comment by Ben Jones
2013-09-20 06:57:47

‘Everybody,’ declared Thornberg when asked who is benefiting. ‘Listen to me, everybody…You don’t have to worry about housing’

So did everybody benefit in 2000-2006? Did we not have to ‘worry’ about house prices when you were telling the media to run for the hills? What exactly is different about this boom?

I’ll answer that myself. It’s the loans. It’s the cash purchases. See, the new line is, prices can go to the moon and we can all celebrate. There is no price problem, at any level.

Here’s one thing; I know of a recent house sale in Flagstaff. It was on the market for 2 days, sold for just over $300k. The UHS split up $18k. The closing costs were $27k. Nice work if you can get it. But nothing was produced. Sure, some of these people are at Applebee’s right now, waiting to get a table. But for all the churn and apparent prosperity, somebody has a big ass loan and nothing was really added to the economy.

Comment by In Colorado
2013-09-20 07:04:45

My understanding is that the huge commissions and closing costs are unique to the USA and are much smaller elsewhere (what are they in Canada? Perhaps they have our parasite class too.). As a foreign friend who moved to the USA once pointed out, in the USA you make money by “taking a cut” and not by doing anything of real value.

 
Comment by Whac-A-Bubble™
2013-09-20 07:09:34

“What exactly is different about this boom?”

What’s different is Thornberg’s constituents.

 
Comment by Housing Analyst
2013-09-20 07:09:44

Well… as history has shown, todays sale at an inflated price is tomorrows default.

And if you don’t know what constitutes an inflated price, I’ll be happy to school you on it.

 
Comment by Prime_Is_Contained
2013-09-22 11:44:28

somebody has a big ass loan and nothing was really added to the economy.

In general, I am opposed to debt, but I can see how one _could_ argue that there is an economic benefit to someone promising to labor for years and years in the future, in service of the economy (and their debt-masters).

Compare two economies, one in which the above occurred, and one in which the buyer instead decided to retire and live below their means…

 
 
 
Comment by Whac-A-Bubble™
2013-09-20 06:48:24

Occasionally, amidst the ever-thick propaganda fog of REIC huckster lies and misrepresentations, a gleaming pearl of truth leaks out into the MSM.

Got shadow inventory?

“Ever wondered why, in the face of a sharp inventory shortage, new home construction still lags so far behind other housing indicators?

…according to Trulia Chief Economist Jed Kolko: 1) Because household formation, which fuels demand, is only half its normal rate. 2) Because, despite a supply shortage, the vacancy rate remains elevated, thanks to a glut of unlisted vacant properties, many of them foreclosures. The market does not have a housing shortage, just a shortage of for-sale listings. ‘Many of those vacant, off-market homes could come onto the market, especially if their owners are just waiting for prices to rise enough to make selling worthwhile,’ Kolko wrote in a blog post.”

Comment by Housing Analyst
2013-09-20 07:04:37

a glut of unlisted vacant properties, many of them foreclosures.

And he said so on Bloomy yesterday.

If you think 25 million excess empty houses are easily hidden, think again.

Comment by Whac-A-Bubble™
2013-09-20 07:13:06

So far the exercise to hide the shadow inventory elephant under the living room rug has worked just fine.

What makes you think this will change any time soon?

Comment by Housing Analyst
2013-09-20 07:17:56

Like the game of musical chairs, the music stops… and it happens quite abruptly.

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Comment by Blue Skye
2013-09-20 07:45:08

Like a game of musical chairs, people fall out of the game one by one, until there is no one left doing the debt donkey dance. Those still dancing cannot see how foolish the game is.

 
Comment by Housing Analyst
 
 
Comment by (Still) Waiting for the Fall
2013-09-20 08:28:11

Someone on this blog about five years ago said,
“Never Panic. But if panic you must, be the first one to the door.”
I think all will take is a BX or AMH to start to tank, and I’ll bet the 4-sale signs start littering the landscape on a scale we’ve never seen.

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Comment by brother_jimmy
2013-09-20 08:54:48

They are popping up in Central FL like mushrooms.

Lots more inventory on the market than even six months back. Mostly at wishing prices, but we say the same in 2006 before the catipulation.

 
Comment by Whac-A-Bubble™
2013-09-20 10:06:00

Brings to mind my favorite-ever comment on a piece of sheet music that I once had to read on a freelance gig. Right in the middle of a passage which placed insurmountable technical demands on the performer was scrawled the helpful advice:

DON’T PANIC!

 
Comment by (Still) Waiting for the Fall
2013-09-20 11:20:10

One of the secretaries I had under my employ a long while ago, back when screen savers were ‘new’ snuck into my office and set up a scrolling marquee on my computer that said,

REMAIN.COM

 
 
 
Comment by Steadykat
2013-09-20 10:12:11

SoUtah story:
Got a couple of friends (married couple) that live in Washington Fields next to St George. The people (married couple with kids) who owned the house across the street from them moved out about 4 1/2 years ago after getting a NOD from their lender.

Three months after leaving the husband moves back into the house with his eldest daughter. Evidently, numerous financial difficulties split the marriage.

A couple of months later the “husband” starts renting out two rooms to a couple of other individuals.

This has been going on for 4 years now, after 5-6 years of no mortgage payments, and the Bank still hasn’t pulled the trigger and taken back the house.

 
 
Comment by Arizona Slim
2013-09-20 09:05:13

There’s a vacant house in the next block. Owners bailed more than two years ago. I have yet to see a NOTS at that place.

 
Comment by "Uncle Fed, why won't you love ME?"
2013-09-20 11:57:17

Every time an old foreclosure gets sold, a new one comes on the market.

Comment by MightyMike
2013-09-20 16:31:59

and an angel get his wings

 
 
 
Comment by Whac-A-Bubble™
2013-09-20 06:54:59

“The longer-term effects, notes David Berson, former chief economist at mortgage lending giant Fannie Mae, are difficult to guess, because this housing recovery is unlike any that have come before.”

In particular, absent government life support, there would be no recovery.

Comment by azdude02
2013-09-20 07:11:16

absent debt there would be no recovery?

U see the govt is borrowing 50 cents of the money it is spending.

The FED simply creates money out of nothing and gives the govt notes in exchange for the treasuries. the FED has added about 3 trillion in bonds to their balance sheet. So 3 trillion dollars has been added to the system. But wait, almost 2 trillion is in bank reserves with the FED since they started paying interest on the reserves.

Those treasuries do have a maturity. When they mature theoretically the govt is suppose to give the FED their principal back. So where do they get the money to pay down the maturing treasuries? Well you can simply issue new treasuries to pay off the old ones. It is a viscous cycle of debt. Is there anything that would stop the cycle?

Comment by Whac-A-Bubble™
2013-09-20 08:42:27

“When they mature theoretically the govt is suppose to give the FED their principal back.”

Who checks them on this.

More generally, isn’t any loan (e.g. MBS) the Fed buys in order to bury it forever on its balance sheet pretty much extinguished from existence, in the sense that no private individual will be harmed if it goes into default?

Comment by Army No Va
2013-09-20 12:19:08

The FED is owned by the bankers. When the time comes, they will get this out of the govt/people. Heck it could be - your family’s share is $200k. Payup or report to camp/farm 108 to work it off ! Some kind of national emergency triggers martial law or something. Or they just by up all the assets and inflate away. But they will get repaid.

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Comment by Housing Analyst
2013-09-20 07:13:19

“The longer-term effects, notes David Berson, former chief economist at mortgage lending giant Fannie Mae, are difficult to guess, because this housing recovery is unlike any that have come before.”

Well let’s apply the smell test and see if it stands up to scrutiny.

By definition, a “housing recovery” is falling prices to dramatically lower and more affordable levels.

????

 
 
Comment by Whac-A-Bubble™
2013-09-20 07:03:36

“This tightening hit homeowners where it hurt. Goldman’s data showed that as rates on 30-year fixed mortgages rose 1.2 percentage points since May, the monthly mortgage payment for a median-priced home with a 20% down payment rose by $110.”

I have repeatedly pointed out that this logic is flawed, as rising mortgage rates are not automatically accompanied by a commensurate rise in prospective buyer incomes which would suddenly enable them to fork over an extra $110 a month towards their mortgage.

The right question to ask is ‘assuming the same monthly payment as before, how much less principle can be financed after the rate increase’?

For instance, if the 30-year fixed mortgage rate increased from, say, 2.38% to 3.58%, the amount of principle that could be financed assuming the same monthly payment would drop by 14.2%.

This has nothing to do with ‘Goldman’s data,’ folks. Dust off your high school algebra textbook and do the math if you don’t believe me.

Comment by Ben Jones
2013-09-20 07:15:19

‘Real-estate investment trusts that rely on the borrowing owned $343 billion of the securities on March 31, while commercial banks, whose deposit costs are also tied to the Fed rates, now hold more than $1.3 trillion, central bank data show.’

‘Ability to fund cheaply remains critical for these levered carry trades,’ as well investments often made by hedge funds known as inverse interest-only notes, the BNP analysts wrote.’

Ah, ‘I see’ said the blind man:

‘Ability to fund cheaply remains critical for these levered carry trades’

And I’m always curious when I first spy a financial innovation:

‘investments often made by hedge funds known as inverse interest-only notes’

Comment by Professorlocknload
2013-09-20 15:17:20

‘Real-estate investment trusts that rely on the borrowing owned $343 billion of the securities on March 31, while commercial banks, whose deposit costs are also tied to the Fed rates, now hold more than $1.3 trillion, central bank data show.’

Who owns the REIT’s? And as for the Commercial Banks, we all know who owns the $1.3 trillion there, eh?

 
 
Comment by "Uncle Fed, why won't you love ME?"
2013-09-20 11:53:46

Whac:

You’re looking at it all wrong. It has nothing to do with what people can afford. The rich people control everything, and the rest of us just have to work harder, pay more, and eat less if we want to keep up. If you can’t find a way to fork over an infinitely greater and greater amount of money to the Banskters every month, then you are not competitive and you will live under a bridge.

The Banksters would rather leave their assets empty forever than allow you to buy them at a price you can afford. They do it because they CAN. They don’t even care about all the money they lose on taxes/repairs for vacant houses in their portfolio. I mean, they bought the houses to make money, but they don’t care if they lose money. They will only sell them if they can get enough money out of it to purchase a small island.

See, Whac? Isn’t it all clear now?

Comment by Whac-A-Bubble™
2013-09-20 15:35:28

“The Banksters would rather leave their assets empty forever than allow you to buy them at a price you can afford. They do it because they CAN.”

Is this really legal? I doubt it.

I’m wondering how long it will be from now until when laws that are on the books are once again enforced.

 
 
 
Comment by Housing Analyst
2013-09-20 07:07:58

A strange conflation of articles…. Houston and Koko quotes.

Yesterday Koko was asked where the biggest bubbles are and what areas are facing massive price declines…… California and Texas.

 
Comment by Whac-A-Bubble™
2013-09-20 07:11:25

“Fed Chairman Ben Bernanke made it clear that he had lost control of the market, causing a tightening of financial conditions that directly hit the highly supported housing market through higher mortgage rates.”

QE3 head fakes are certain to fix that problem.

Comment by azdude02
2013-09-20 07:25:53

QE is actually making most folks poorer. Its only folks with assets that are invited to this party.

Comment by Blue Skye
2013-09-20 07:48:37

Dude, the party is for you. There would be no party without the debt donkeys. What is a pig roast without the pig?

Comment by azdude02
2013-09-20 08:24:57

bring it on. I’m making money this time around.

Hows that 9-5 treatn you?

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Comment by Whac-A-Bubble™
2013-09-20 08:43:51

“What is a pig roast without the pig?”

Have you ever been to a vegan luau?

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Comment by Neuromance
2013-09-20 09:00:42

“In his post-FOMC press conference, Fed Chairman Ben Bernanke made it clear that he had lost control of the market, causing a tightening of financial conditions that directly hit the highly supported housing market through higher mortgage rates.

The Fed is a lion, and the market is a pack of hyenas. The lion can kill one or more hyenas, but the pack can kill the lion. Usually the pack shies away. But if their blood is up, they can take down the lion.

Comment by Whac-A-Bubble™
2013-09-20 09:07:30

The Fed is a whale, and the market is an ocean full of plankton.

When plankton dies off, so do whales.

 
Comment by Carl Morris
2013-09-20 09:47:15

The Fed is a lion, and the market is a pack of hyenas. The lion can kill one or more hyenas, but the pack can kill the lion. Usually the pack shies away. But if their blood is up, they can take down the lion.

What if the hyenas already have iPhones and all the fast food they can eat?

 
 
 
Comment by Whac-A-Bubble™
2013-09-20 07:19:30

Got hair-of-the-dog hangover cures?

“As Ludwig von Mises of the Austrian School would love to compare, any economy on a central bank-induced cheap credit binge is like a drug addict… with time, one needs greater and greater dosages to even maintain the status quo. Any cleansing process of this addiction has to start with the rather painful, but much needed, withdrawal symptoms.”

“The path that Bernanke has put the US on is very different. He has taken the route of greater doses of stimuli that would allow him to temporarily postpone the withdrawal symptoms, but would ultimately cause the death of the patient.”

 
Comment by Housing Analyst
2013-09-20 07:22:59

And BTW…..

New construction lingers at low levels for one simple reason…… We know there is tens of millions of excess empty houses idling on the back burner and they’re going to hit the market sooner or later.

Comment by Blue Skye
2013-09-20 07:58:48

The “low levels” are lifetime low levels, lower than anything over the past 50 years at least. We’ve passed peak buy to get rich, we’ve past peak build it and they will come. We’ve passed peak buy to rent. This year looked like peak renovate to rent.

Isn’t there any way left for us to borrow our way to wealth in real estate? I guess we will see next year.

 
Comment by "Uncle Fed, why won't you love ME?"
2013-09-20 11:41:27

And when the hit the market, wages are likely to be even lower.

Comment by Housing Analyst
2013-09-20 11:54:54

Exactly. Therefore;

“Are you really that foolish to believe wages are going to double to meet grossly inflated housing prices. Of course not….. housing prices will crater 65% to meet wages….. interest rates will make it happen…… every.single.time.”

 
 
 
Comment by chi-nyc-sf-dc
2013-09-20 08:20:30

Ruh Roh, someone isn’t “on plan”….

Stocks are about to plunge, Wells Fargo warns

http://finance.yahoo.com/news/stocks-plunge-wells-fargo-warns-112421641.html

Comment by azdude02
2013-09-20 08:26:27

must have went short?

 
Comment by Neuromance
2013-09-20 09:01:56

They need someone to be on the other side of the trade. For example, the Squid has a pretty good track record of head-faking the muppets.

 
Comment by Whac-A-Bubble™
2013-09-20 10:08:36

“Stocks are about to plunge, Wells Fargo warns”

Is it safe to assume the Fed would double the size of QE3 if necessary to nip this predicted plunge in the bud?

Comment by "Uncle Fed, why won't you love ME?"
2013-09-20 11:26:45

No, that would only be a safe assumption if I were still holding the short position that I sold on Wednesdsay.

 
 
 
 
Comment by erik
2013-09-21 07:54:36

Imagine if you will that all debt, everywhere and for everyone, were wiped out overnight and that ownership of all things reverted to the debtors . What a twilight zone scenario the next morning would be…I’m not advocating this, mind you, but it would be interesting, eh? This sort of thing has happened to a fair extent in the past, due to war and revolution.

 
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