The Price Of Profligacy
Readers suggested a topic on central bank policy. “Has the Fed just signaled that tapering is off the table? Prediction: Given the Fed’s concern about supporting stock prices, there will be no Octaper. Everybody knows that October is the riskiest month for stock prices, and the Fed will not want history to blame it for an October crash due to a taper re-commitment shock.”
One said, “When all else fails, we’ll have to get money to that darn undeserving deadbeat, Joe6pack. Keynes, rising in the mist. It’s his way or the eventual death of capitalism, which will always choke itself out, if left to its own devices.”
A reply, “Garbage. The economy does not rely on cheap interest. Only the gamblers do. The economy relies on the real wealth creators making a profit.”
One asks, “Could the U.S. handle a 5, 6, or 7 percent yield on the 10 year treasury?”
The New Zealand Herald. “Has US Federal Reserve Governor Ben Bernanke made the right call? Let’s hope so. His message was clear - markets have gotten ahead of themselves in predicting a return to normal policy settings and he wants to see things really humming before he starts pulling back - or tapering, to use the current buzz word. That is a big call for all of us. The US dollar immediately fell. The New Zealand rose and will now likely stay higher for longer.”
“It might be a long bow given the many complex factors at play - not least the Auckland housing bubble - but lower inflation and a higher kiwi may weigh on our own Reserve Bank and shift the time frame for raising rates - which was signalled in the last monetary policy statement.”
“Stepping back though, there is room for some nagging concern about whether Bernanke has made the right call for the world. Hindsight tells us that Bernanke’s predecessor Alan Greenspan left US rates too low for too long in the early 2000s after the dot-com crash. That easy credit environment played a big role in causing the US housing bubble that sparked the Global Financial Crisis in the first place.”
“Bernanke will be highly aware of that of course. He’s done the math and decided that the US economy is not yet well. One would hope he hasn’t been swayed by internal political pressures.”
The Herald Sun in Australia. “Put on your dancing shoes and let’s boogie! That’s the message Dr Ben Bernanke sent to world markets with his shock decision to delay his very own ‘taper’ timetable. Like any party that has gone on for a long time, though, there are bound to be headaches and our own Reserve Bank Governor Glenn Stevens will be one of the first to break out the aspirin. If Stevens cuts interest rates further to help stimulate the economy and put a brake on the rising Aussie dollar, then the chances of asset bubbles moving from a concern to a reality become that much greater.”
From CNBC. “Federal Reserve Chairman Ben Bernanke and U.K. Finance Minister George Osborne are creating the conditions for the next global credit bubble, according to Societe Generale veteran strategist Albert Edwards. Edwards, who is known for his extremely bearish views, said that Osborne’s schemes to support the U.K. housing market, and Bernanke’s continuance of monetary stimulus, were pushing the world towards another boom-and-bust situation.”
“‘In the same way that we spent the years 2001-2007 heaping derision on Alan Greenspan as being the chief architect of the global credit bubble and subsequent bust, we must now do the same for Fed Chair Ben Bernanke and U.K. Finance Minister George Osborne,’ Edwards wrote in a research note on Thursday.”
“‘I can believe the arch-dove Bernanke might have wanted to keep blowing his bubbles, but I am amazed that he got the rest of the Fed, or at least the majority, on his side,’ he wrote, arguing that the central bank had spent weeks preparing markets for a tapering off of stimulus.”
From Forbes. “The Federal Reserve did something completely unpredicted on Wednesday; nothing. So called ‘tapering’ of QE (quantitative Easing) was indefinitely placed in deep freeze………until such time as the U.S. economy is more robust. This artificial demand for mortgages and U.S. Treasuries by all means is the lynchpin to keeping rates low. What is the price of this profligacy?”
“Mr. B’s low rate policies punish the virtuous, the millions of responsible savers who did not take out flim-flam mortgages with little chance of repayment. They can no longer count on decent risk free returns for retirements. Debtors across the spectrum reap benefit. The biggest beneficiary is the U.S. Government. Imagine if we took the training wheels off the bike and had a more normal yield curve where short term rates were 3 percent and longer dated treasuries were 5 or even 6 percent.”
“The low mortgage rates have indeed spurred the housing market. But that too is to some extent artificial. There are still various mortgage programs, like FHA, (Federal Housing Administration) where only a 3 percent down payment is required. Fannie Mae has a three percent down offering as well. FHA standards have been so lax and defaults so high that the agency is now basically bankrupt. They have had to raise insurance premiums to borrowers so high that the products they offer now are often more expensive than many of the conventional Fannie Mae and Freddie Mac mortgages.”
“Where would the housing market be without mortgages of lax underwriting standards? Where would housing be without government subsidy welfare HAMP and HARP which offer lower rates and principal reductions to defaulted borrowers? How many millions of the home purchases over the last four years have been by investment group’s bottom fishing rather than real underlying demand by owner occupied dwellers?”
“Has anyone considered that if there are real buyers out there, with a real cash to make meaningful down payments then a hundred basis point (one percent) increase in rates shouldn’t matter very much? Maybe the price of some houses would come down to compensate for the higher rates. There are so many asterisks next to the housing recovery I wonder where the truth really lies.”
We have several posters here that don’t think there is a bubble in the US housing market. They have different reasons. But even if you don’t think prices are too high, have you convinced yourself that the market is going to run right up to a sustainable maximum and stop? Or is it more likely that the speculators and other forces, like the central bank, would go too far?
We all watched Greenspan yawn his way through a stock bubble that erased a trillion bucks or more. Then he recklessly denied a bubble in housing until it was too late. IMO, Bernanke and his global crew have run up a far more dangerous financial situation. And they just can’t stop.
The ass rapings will continue until morale improves.!
The fact that Ben back peddled on taper shows he fears the bond market backlash. Now watch and see how they’ll talk about cutting back and those rates will rise again….rates went down for now. Fed will continue the taper talk and it’ll go back up……….because no one believes him any more and consumer confidence will dwindle and smart money will stay away !!!
…Higher rates hurts ben’s books while government pays alot in interest expense as banks have it harder to lend. Rates are staying within 2.70 bracket and the taper talk will push it up again. Their hand will get forced and they’ll need to stop QE but it seems bernanke wants yellen to do it
The day they announced this, I found the market reaction interesting. After all the build up for months, how come the Dow only went up 160 points? Why not 300, or more? And it’s also interesting that the market was just below all time highs, when most believed QE was ending. Then in the days following, treasuries fell along with stocks. The magic dust ain’t working like it used to, apparently.
I think the UHS report that lock box usage is down was a sly shot at the Fed. “See, you just talk about ending QE and we go off a cliff!”
It was the same with Greenspan. “Oh, we can’t raise rates now! We’re just recovering. It’s fragile.” They’ll probably do a Thelma/Louise. I still watch junk bonds for cracks. And then there are these currency problems/over-seas bubbles.
“…currency problems/over-seas bubbles”
The Fed is the only game in the world. The rest of the central bankers are following the lead. I read with interest what happened to the rupee in India as soon as the taper talk started. Now I suppose the dollar will fall.
At any rate, the delicate equilibrium that is in global currency market will be at risk. Eventually, IMHO, the cumulative upward force on the bond yield will force Fed’s hand.
“They’ll probably do a Thelma/Louise.”
Didn’t they pretty much already try this in Fall 2008? I distinctly recall seeing George W. Bush and Ben Bernanke get on national teevee to tell the U.S. populace that ‘this sucker is going down.’ The deer-in-the-headlights expressions on their faces will remain seared into my memory forever.
What’s so sickening is the fact that if the shit hits the fan again they’ll probably pull the same stunt, and use scare tactics like “if we don’t bail out these banks, everybody will lose all their money.”
“if we don’t bail out these banks, everybody will lose all their money.”
It also seems quite likely that after they use scare tactics to convince weak hands to sell, they will bail out Megabank, Inc once again in order to enable them to snap up devalued assets at fire sale prices — just as was done circa March 2009 and beyond via QE1, QE2 and QE3.
Well just consider this. Less than 10% of the population currently own 80% of the stock in publicly traded companies. When the next crash happens I expect those same 10% will swoop in and take another 10-15% of the float. The long game here just might be to take the whole thing private and leave the rest of us only one investing option; buying bonds and treasuries. This will be the final solution, stick the public with $16 trillion of worthless debt. At that point the only thing I can see to save us would be a military coup.
Bubble… price fixing… call it what you want but it’s not just housing. Food, autos and fuel are price fixed, stripped out of inflation numbers(afterall… why would you include them considering they’re fixed… you know it and I know it), all as means to counter the powerful deflationary spiral. And it’s failing miserably and causing misery to millions.
It’s game over, ink jet Ben has reached stalemate
When he throws over that chess board , I want to be a first hand witness to watch his playing pieces fly all over the place!
I kinda wonder if we haven’t witnessed the Bernanke Moment. When he said this week, “I don’t recall saying we were going to taper.” And the same week, we have Obama saying “we aren’t a Banana Republic.”
Day-o, me say day-o
Daylight come and me wanna go home,
Day-o, me say day-o
Daylight come and me wanna go home.
Work all night ’til the mornin’ come,
Daylight come and me wanna go home,
Stack banana ’til the mornin’ come,
Daylight come and me wanna go home.
Come mister tally man, tally me banana,
Daylight come and me wanna go home,
Come mister tally man, tally me banana,
Daylight come and me wanna go home.
A beautiful bunch o’ ripe bananas,
Daylight come and me wanna go home,
Lift six hand, seven hand, eight hand bunch,
Daylight come and me wanna go home.
Come mister tally man, tally me banana,
Daylight come and me wanna go home,
Come mister tally man, tally me banana,
Daylight come and me wanna go home.
Day-o, me say day-o,
Daylight come and me wanna go home.
http://www.boyscouttrail.com/content/song/dayo-1157.asp
+1 Ben
There is a bubble in housing in some markets, if ROI is considered. There isn’t one in some markets, which still offer a decent positive return. But, long run, that isn’t the crux of this mess. The problem lies in the dollar bubble, (devaluation.)
The fact is, you are correct, the Fed can’t stop. It’s dollar is a credit instrument now. A kind of bond, for there is nothing backing it.
So, the Fed must now proceed to destroy it’s “bond.”
When no one want’s that “bond” any more, what would still be of value?
There is a bubble in housing in some markets, if ROI is considered.
There is no ‘ROI’ on an SFR at retail prices. SFR’s depreciate. And at current massively inflated asking prices of resale housing, cap rates are negative.
It’s loss no matter what heading you’re flying.
“We have several posters here that don’t think there is a bubble in the US housing market.”
None of whom have any skin in the game, I presume?
P.S. BTW I don’t — I’m actually hedged for real estate to go up, down, or sideways.
P.S. BTW I don’t — I’m actually hedged for real estate to go up, down, or sideways.
Ummm… Howdya do that??
1) Buy stuff that goes up with real estate.
2) Buy other stuff that goes up when real estate drops.
3) Sell whatever goes up and reallocate.
4) if it doesn’t skyrocket in price after you buy it, don’t buy it.
UP Buy it with a deposit of $1,000 closing in six months.
Sell it for $20,000 more ($20,000 deposit) than you paid and close early.
DOWN Talk with the holder of the honking second mortgage before you buy it and insist on a 75% discount on$100,000 Second mortgage closing, in writing. Give your $1,000 deposit and then resell it to Joe for generous discount off owed amount. How generous depends on how much you want your profit and how uniformed the buyer is.
SIDWAYS Buy it for $200,000 and sell it for $200,000. You pay the real estate fees (2%) and get a credit from the Vendor for 6%. Discount the underwater mortgage on closing, arrange financing for the buyer, subdivide the extra lot off before closing, sell the property air rights to yourself and rent out billboard space on twenty year lease payable in advance. Rent out antennae space for twenty years payable in advance. I’m getting tired now.
‘Stocks shot up following Wednesday’s Open Market Committee meeting-and on the backs of the $26 billion in cash that poured into mostly exchange-traded funds prior to the decision-then proceeded to turn tail in the other direction, giving up all their post-Fed gains. The developments raised an inevitable question of whether the market, after thriving on a $3.7 trillion Fed balance sheet of cheap money, had finally hit a wall and a bubble of sorts had popped.’
“Bubbling his way out of trouble,” was the way Michael Hartnett, the chief market strategist atBank of America (BAC)Merrill Lynch, termed Fed Chairman Ben Bernanke’s approach to the market.’
‘Hartnett’s analysis was not so much that the bubble had been breached, but rather a suggestion that perhaps all the Fed accommodation had caused a bubble with which Bernanke was happily compliant.’
‘ Critics worry that such loose Fed policy always feeds into bubbles, and that the stock market surge of 150 percent off the March 2009 lows is just the latest case of a central-bank induced catastrophe waiting to happen. (David Stockman, the maverick director of the Reagan-era Office of Management and Budget, makes an 850-page case in his recent book The Great Deformation.)’
‘Investor Doug Kass at Seabreeze Partners Management believes the Fed has dug itself a hole from which there may be no escape. Investors hoping that the market rally was pinned on growth and not trillions in quantitative easing may be the ones who pay the price.’
“There is no way out for the Fed once it started the process of printing,” Kass told clients. “Getting in was easy. Getting out-not so much. The Fed is trapped and can’t end tapering or else the bond and stock markets will blow up. The longer this continues the bigger the inevitable burst.”
http://finance.yahoo.com/news/did-fed-just-pop-stock-131753040.html
There is no way out for the Fed once it started the process of printing,” Kass told clients. “Getting in was easy. Getting out-not so much. The Fed is trapped and can’t end tapering or else the bond and stock markets will blow up. The longer this continues the bigger the inevitable burst.”
——————-
Largest Bank In World Announces Crash
http://beforeitsnews.com/economics-and-politics/2013/09/largest-bank-in-world-announces-crash-2456544.html
“The Fed is trapped and can’t end tapering or else the bond and stock markets will blow up.”
Does he mean the Fed can’t end QE? Is that a typo, ’cause the dreaded “T” word damn near tanked this Wurlitzer.
Hard to figure these Academic fools getting real here and developing a modicum of prudence and common sense.
Granted, stepping back and letting it all go is the only answer, so the healing can take place, but since when has any politician not pushed problems onto the next guys watch?
QE, ever accelerating…into the wall.
‘Investors hoping that the market rally was pinned on growth and not trillions in quantitative easing may be the ones who pay the price.’
Being the greater fools in this round, wouldn’t it be meet and right for them so to do?
The only thing that appears to show any signs of life are the constant bubbles and then printing a bunch of money afterwords to mop it all up.
Don’t fight the tape!!!! You may not agree with what is going on but sometimes you just have to suck it up and go with the flow to make some money.
Tape and nickels and steamrollers, oh my.
Dancing along with the tape works beautifully so long as the music keeps playing. If you don’t find a chair quickly once the music stops, you will soon experience the pain of your @$$ hitting the floor.
good link from phony jethro
Druckenmiller: Fed robbing poor to pay rich
Published: Thursday, 19 Sep 2013 | 11:06 AM ET
By: Robert Frank | CNBC Reporter and Editor
The Federal Reserve isn’t just inflating markets but is shifting a massive amount of wealth from the middle class and poor to the rich, according to billionaire hedge fund manager Stanley Druckenmiller.
In an interview on “Squawk Box,” the founder of Duquesne Capital said the Fed’s policy of quantitative easing was inflating stocks and other assets held by wealthy investors like himself. But the price of making the rich richer will be paid by future generations.
“This is fantastic for every rich person,” he said Thursday, a day after the Fed’s stunning decision to delay tightening its monetary policy. “This is the biggest redistribution of wealth from the middle class and the poor to the rich ever.”
“Who owns assets—the rich, the billionaires. You think Warren Buffett hates this stuff? You think I hate this stuff? I had a very good day yesterday.”
Druckenmiller, whose net worth is estimated at more than $2 billion, said that the implication of the Fed’s policy is that the rich will spend their wealth and create jobs—essentially betting on “trickle-down economics.”
“I mean, maybe this trickle-down monetary policy that gives money to billionaires and hopefully we go spend it is going to work,” he said. “But it hasn’t worked for five years.”
http://www.cnbc.com/id/101046937 - 83k -
Keynes, rising in the mist.
That was my point to my MIL a while back when telling her how desperately they needed to pass the Simpson Bowles plan (or something like it). Why?
Because once they have a credible deficit reduction program, the Fed won’t have to try so hard to keep long-term rates low.
Without action like Simpon Bowles, the Fed will keep printing and printing, which does nothing but make the rich even richer. And ultimately inflation will kill the little guy.
First and foremost, i live in Europe, hence my English will be not that good.
But, what we see now is really frightening. Back in 2009-2010, i thought this must have been the bottom, from now on we only get higher.
Because i really love this country, and eventually want to move over to the US, i began to do some research on the housing market. I found a place in Southern Florida: Cape Coral, which i visited twice. I found a house i really felt in love with, but unfortunately i faced some troubles with selling a lotin my country. So, i wasn’t able to buy the house.
Too bad, but life goes on, and i thought with all the mess we saw the recovery had to be very slow. (at least, must be very slow) I was sure of that, but then something started. 2012 was strange… the slow and steady recovery i was hoping for changed in something else. At that point, i thought: Did they not learned anything? Sure, i was disappointed, but actually i am very happy that i learned a lesson. (more than one)
What we see now is something that will not last long. It’s hard to say when, but i am sure a next crash is inevitable. This week has showed is how the economy (or shall we say: ‘market’) is hardly dependent from the fed. If they stop with the easy money, markets will crash, and may be we go down to a deeper level than we just saw.
Very frightening to see the truth.
“I found a house i really felt in love with”
And theres your problem.
What’s wrong with that? I think everybody must have had this feeling when they want to buy something. Whether it’s a house or a car, or something else. I think very less people buy a house they don’t love.
Unless those who don’t care, those who think generating money is the only thing that counts.
If every other aspect is ok (budget ((short- and longtime)), location, you have a job that you at least will provide enough financial strength for a long time, meaning there are no risks of loosing your job, the house is in good shape, you feel confident with the choice,…
What really was an eye-opener for me was, when i was there it was for sale for under 100.000$, now according to zillow and trulia the estimates are 190.000$ almost double in only 12 months, then you know something is not right. Many say: “the market was too undervalued with the recession”! Ok, may be, but even it is so than is this doubling in value not right if you look to all the underlying factors.
Maybe it was because the area is now booming (at least that is what others from the economic department say). We will see how long this boom will last. I hope long… because they deserve it after what has happened to those people. But, i hope they aren’t to much positive and that they be realistic.
Yep, investing on emotion is not a good idea. However, if one finds a place one would like to live, and has the where-with-all to sustain a loss if a forced sale is necessary, why not?
For sure, it’s never a good idea to buy property that won’t sustain itself in the event one must evacuate it for some reason. Hard to sell a house that can’t be priced at positive cash flow, it’s real value to an investor.
You’re going to sustain a loss under the best conditions. At current asking prices of resale housing, the losses are so large that you’ll never recover, regardless of location.
Here in America there is a children’s game called “musical chairs.” In this game there are n participants and n-1 chairs. The chairs are all in a row. The children single file circle around the chairs while music plays. Someone stops the music and the lucky kids closes to the chairs sit down. The kid that did not get a chair loses. The kids then have to sand. A chair is removed. The game starts again.
This continues until there are y kids and y-1 chairs. The music stops. Y-1 kids win the game.
When you see who lost during the all the music stops, the number of losers outnumber the winners.
This is how the stock bubble and real estate bubble will end. There will be huge crashes in both asset classes, taking out most of the people.
The irony is that if you do not participate and this goes on for a number of years, you miss the chance of winning big and cashing out before the music is over.
Best to do: do not invest what you will miss.
I am hoping that the 34% of my assets, which are neither in stocks nor real estate, will be enough to get me through a crash. I don’t expect a crash within the next 36 months unless a major terror incident or natural disaster strikes the U.S.
I expect Janet Yellen to replace Bernanke and continue the bubble and I expect Hillary Clinton to be elected president in 2016. Then another 4 years of bubble.
Good explanation, it is exactly what is happening right now.
It’s sad but it is the truth. When i was young (i’m still young 29), but i mean younger, it was normal to see yearly price-apprications of 5%.
Everything looked normal back then.
A house was something to live in, to upgrade to fulfill your wishes, to raise up children and to get old in. (So, it was in my country)
And i think that those expectations were right.
Now the housing market has become something like a stock-market.
Buyers with the expectations i pointed out are now very scarce.
Sometimes, they don’t qualify for the lender standards or they afraid to make again a big loss. Some others are lucky, they have a good job or there parents want to help them, but this is the minority.
Also, it is good to see where, because not every housing market is the same. I know and i understand that Florida and California are popular among investors.
California is on the edge of collapse.
“Just for the record; there is no shortage of housing. Not in California, not in Tokyo, not anywhere. And there will come a day (again) when the media will tell us, ‘there’s a glut of houses for sale in….’, and regale us with sob stories, ‘I was doing great until the economy went south and my income went away and I can’t get rid of this damned house!’”
~Ben Jones, August 8, 2013
This false notion…. this lie….. that there is a shortage of housing in the US is laughable considering there are tens of millions of excess empty houses out there. A sea of them. And it’s growing. Day by day.
“This false notion…. this lie….. that there is a shortage of housing in the US is laughable considering there are tens of millions of excess empty houses out there.”
Look at it this way: If you wanted to unload homes at a premium on clueless foreigners, wouldn’t it help encourage them to pay top dollar to convince them there is a shortage?
“When i was young (i’m still young 29), but i mean younger, it was normal to see yearly price-apprications of 5%.”
If you are only 29, then you most likely have never seen normal rates of appreciation since you started paying attention. Robert Shiller has data in his book Irrational Exuberance going back to the 1800s showing that before the Housing Bubble, appreciation rates were just enough to keep up with inflation.
But of course, his data shouldn’t be taken at face value as a measure of investment return on home ownership, as it ignores the myriad costs of owning (interest, taxes, insurance, maintenance and repair, yard care, HOA dues, Mello Roos, etc etc etc). Once these are properly factored into the calculation, housing is always and everywhere a loss.
Bill — apologies for posting on the ‘musical chairs’ metaphor above just before reading your elaboration on it.
As they say, great minds think alike.
No problem PermaBear!
I only seem like a permabear because of my stand in favor of fundamentals over the Fed’s artificially propped up housing prices, which are quite clearly not sustainable.
It’s not my fault that the effort to prop up prices has been ongoing and constant for a period of years already.
+infinity, PB!
“Hindsight tells us that Bernanke’s predecessor Alan Greenspan left US rates too low for too long in the early 2000s after the dot-com crash. That easy credit environment played a big role in causing the US housing bubble that sparked the Global Financial Crisis in the first place.”
It’s different this time.
“Has anyone considered that if there are real buyers out there, with a real cash to make meaningful down payments then a hundred basis point (one percent) increase in rates shouldn’t matter very much?”
The increase in rates this year from 3.35% in early May 2013 up to the most recently reported level (before QE3 taper head fake) of 4.50%, just four months later in early September 2013, hammered the amount one could finance on the same monthly payment by 13%. For instance, a buyer who could “afford” a monthly payment of $1000 a month could have financed $226,900 in principal in early May, but only $197,400 recently — a loss of purchasing power of around $30,000 over the course of four months.
This is a simple mathematical fact you should have learned in high school algebra class which has nothing to do with whether buyers are real or figments of the Realtor®’s imagination.
Just do the math, and ignore the NAR-funded MSM housing pimps.
P.S. Did y’all realize that as recently as five years ago, 30-year fixed mortgage rates were at 6.5%?
“Like any party that has gone on for a long time, though, there are bound to be headaches and our own Reserve Bank Governor Glenn Stevens will be one of the first to break out the aspirin.”
Is this the recommended remedy for the hair-of-the-dog hangover cure?
“With over 25 MILLION excess empty houses in the US and another 35 MILLION houses just beginning to come on the market now that boomers are starting to die off, housing prices are going to go alot lower.”
There is no question about it.
“boomers are starting to die off”
Many emerging markets have young populations. India has the best prospects for growth. Many Asian countries still have great demographics. Some middle eastern nations (dreaded word to the know-nothings: “Muslims”) are growing populations. And several Latin American countries.
If you see no future in getting your money out of your house in the U.S. you may as well rent until you drop. Meanwhile you should be ramping up your stock exposure to emerging markets.
The trend is likely to continue unless the U.S. goes libertarian.
Emerging markets have decoupled from the Great American Credit Machine? LOL.
Demographics will do that for them. They are close to the point where they will not miss the U.S. from being a trading partner. BRICs are more interested in trade and know that by being peaceful they gain friends with other nations to trade with. The USA essentially is the big bully who is good at chasing every potential playmate out of the schoolyard.
“If you pay current massively inflated asking prices for resale housing, you’ll get ripped off so excessively that you’ll never recover financially.”
You can say that again.
How many suckers have we heard about right here on the HBB that overpaid by $200k or more?
California Notice Of Defaults Up A Whopping 38.7% In Second Quarter
http://www.ksby.com/news/california-foreclosures-rise-in-2nd-quarter/#_
Did anyone ever tell you your posts are completely out of tune with the real estate recovery siren song currently being played?
“Research firm DataQuick says Tuesday that lenders filed more than 25,700 notices of default from April to June. That was up 38.7 percent from the previous quarter.
However, the figure is down nearly 53 percent from the second quarter of last year and it’s the second-lowest level in seven years.”
No only that, but the headlines he’s posting are out of sync with the facts in the articles.
I answered one of those online surveys a few weeks back which asked when the respondent expects the Fed to tighten. My response was “in 2014″
I stand by that timing, but expect them to keep stringing along any suckers who are sufficiently gullible to buy into hints there may be a sooner taper.
ECONOMY
September 19, 2013, 7:50 p.m. ET
Fed’s Guidance Questioned As Market Misreads Signals
By JON HILSENRATH
The markets received a shot of adrenaline when the Federal Reserve opted not to cut back on its bond-buying program. Robert Tipp, chief market strategist for Prudential fixed income, has advice on how investors should respond. Photo: AP
Federal Reserve officials created new uncertainty about how much farther they will push their easy-money policies—and new questions about how effective they are at communicating their thinking—with the decision to stand pat on the pace of their bond purchases for now.
The Fed on Wednesday went beyond merely deciding to keep buying the $85 billion a month of mortgage-backed securities and U.S. Treasurys that it had been telegraphing for months it might start winding down. In the news conference after a two-day policy meeting, Fed Chairman Ben Bernanke also seemed to walk away from some of the guidance he had given in June on how the bond-buying program would play out over the next year, making it even less clear when the program will end.
Mr. Bernanke said Wednesday that he thought the decision not to begin pulling back on bond purchases was right given a weaker economy than the Fed expected a few months ago and one facing new threats from a fiscal showdown in Washington. He also said the Fed might still proceed with a pullback in the months ahead if the economy cooperates.
In his defense, Mr. Bernanke said that he has never said the Fed would start the pullback in September and that the decision always depended on the economy’s vigor. “I don’t recall stating that we would do any particular thing in this meeting,” Mr. Bernanke said at the news conference.
Yet some investors and analysts said the Fed’s action was the latest in a series of communications missteps, demonstrated by the fact that numerous surveys showed investors broadly expected the central bank to move in September.
…
You just reminded me about my prediction on HBB (probably back when I was “Bill in Maryland”) that the housing bubble will be corrected by 2012.
Well it was not corrected. It’s been put on an artificial life support. “Stasis” is also a good word. How about cryogenically frozen until the social scientists can figure out a cure?
This is a Ted Williams housing market if ever there was one!
Yikes!
Ewwww, I had never heard those details… I learn the most diverse set of things on this blog!
I’m hoping “those details” are falsely reported in that article, but I fear they are not.
My understanding of traditional economic theories broke down a long time ago. Down deep you think supply and demand models can’t be wrong, we just don’t have the right equations. A missing ‘X’ value like Hubble’s constant maybe (technology).
“Housing is never an investment. Housing is a depreciating asset and a loss, always.”
Exactly. Houses depreciating just like automobiles. The difference is that losses on housing are crushing and last a lifetime at current grossly inflated asking prices.
“Houses depreciating just like automobiles.”
I’ve never owned an automobile more than 20 yrs old. Yet I own 2 houses that are more than 100 yrs old and another 2 that will reach 100 in another 5-15 years. How can that be?
How can it be? You’ve dumped $$$ year after year after year. Those losses are yours alone.
good luck. You’re going to need alot of it.
What I wonder are the political pressures and personal incentives in front of a Fed chairman?
That would be fascinating to discover.
If the economy crashes, inflation goes much above 2%, unemployment is above 6%, or housing prices don’t always appreciate, the Fed Chair is a primary scape goat.
Don’t be silly. The Fed’s only interest is the profitability of its member banks. Discovery is unnecessary, only covering your ears is necessary.
You may be right, but they still have to worry about appearances.
Do you really think the Truth Patrol goes off duty on weekends? Seriously?
24/7.
I am so glad I came across this blog in 2004 or 2005 or there ’bouts.
[Yeesh, it was soo hard to find info about housing and a such back then! What a contrast to today.]
When I read on this thread, “Rent until you die” I was reminded of the UAW member who said to the TV camera that his retirement plan was to work until he drops. …I guess I have choices, he does not.?
I pointed a lot of people towards this blog over the years.
I hope they learned, as did I.
Also, hats off to Ben and the tenacious others who keep at it.
Thanks for doing what you do. …Ha. and not getting overly annoyed by my comments. I only wish I were perfect. I’m just glad I’m not an upside down home-ower a wishing and a hoping and a praying. I owe it all to THBB.
“…and not getting overly annoyed by my comments.”
If you are trying to compete with the more annoying posters here over the years, including an army of trolls who got themselves permanently banned for trying to post things nobody save Ben ever read, you will have to step up your efforts.
One asks, “Could the U.S. handle a 5, 6, or 7 percent yield on the 10 year treasury?”
If you’re a saver and live within your means, absolutely. If you are an over-extended debt zombie, well….Bill’s earlier comment about life support sums it up.
Sept. 22, 2013, 1:03 p.m. EDT
The biggest economic news isn’t yet scheduled
Fed speak to dominate the coming week in the economy
By Steve Goldstein, MarketWatch
WASHINGTON (MarketWatch) — The biggest news for the economy that may come this week isn’t even on the docket yet.
That would be, of course, the nomination of the next chairman of the Federal Reserve. With Larry Summers having removed himself from consideration, most observers expect Janet Yellen, the Fed’s current vice chair and someone likely to continue the course of Ben Bernanke, to get the position.
Of course, most observers expected the Fed to taper last week — so stay tuned.
And even if President Barack Obama doesn’t announce a nomination, there will be plenty of Fedtalk to consider — at least nine scheduled speakers from Monday to Friday.
“The market will be looking for an explanation on the non-taper decision delivered in the latest FOMC decision. Several voting members are due to be on the wires, while their opinions on the leadership issue may also be sought,” said currency analysts at UBS.
…
do u have to be an academic to get the FED nod? How much @ass do u have to kiss?
Bullard for Fed President -
Yellen still has her training wheels on -
Whoever - somehow please let them be a realist - not a history major.
Don’t forget that Bernanke telegraphed the banks current problems and he has to make sure of their profitability.
The other 99.9% don’t matter to him ! or Yellen -
No bank is to big to fail - it’s just how ice storms naturally prune trees too weak to survive. You lose a bit but generally the whole survives.
The Fed should give every US citizen a $250,000 prepaid debit card.
What the heck, give “guest citizens” one too.
ft dot com
September 22, 2013 5:03 pm
The Fed is wrong to put off the return to normality
By Martin Feldstein
Bond-buying is no longer a big stimulus to growth or employment, writes Martin Feldstein
The US Federal Reserve’s decision last week to delay the start of its so-called “tapering” has confused investors about the reliability of its forward guidance. It has also created a trap that will make it difficult to start the tapering programme in the future unless the Fed changes its basic approach.
More specifically, Ben Bernanke, the Fed chair, explained that the Federal Open Market Committee (FOMC) had decided not to reduce its pace of bond-buying because current economic conditions were not as favourable as the FOMC members had expected in June. Looking ahead, he said the Fed could begin tapering later this year “if the data confirm our basic outlook”.
That may be a difficult test to pass; the FOMC’s projections in recent years have been repeatedly too optimistic. It looks as though they are repeating the mistake again. At the end of its recent FOMC meeting the Fed released a summary of the economic projections of the FOMC members – the governors of the Fed and presidents of the 12 regional Federal Reserve banks. The central tendency of these projections foresees real gross domestic product growth of 2.0-2.3 per cent for
the 12 months starting with the fourth quarter of 2012.
That would be higher than the US economy has achieved in any of the past three years. For the first half of 2013 the official annualised GDP growth number is now only 1.8 per cent, and more than one-third of that growth was just inventory accumulation. Private estimates for GDP growth in the current third quarter are at about the same level. To reach the midpoint of the FOMC’s central tendency range for this year as a whole would require the growth rate to jump to an annualised rate of 3.2 per cent in the fourth quarter.
Looking further ahead, the FOMC projections call for a growth rate of between 2.9 per cent and 3.1 per cent in 2014. That forecast is already a substantial reduction from the range of 2.9 per cent to 3.5 per cent that the FOMC was predicting less than two months ago. As we get closer to 2014, the prospects for that year are likely to look weaker again.
As Mr Bernanke noted, the rise in long-term interest rates since May is likely to depress the pace of residential construction, the strongest sector in the past year. Consumer spending is likely to remain weak because real after-tax income per capita is lower now than it was a year ago. A fall in the household saving rate has helped to sustain consumer spending but leaves little scope for a further decline in saving to boost future spending. Making the start of tapering depend on the economy achieving the Fed’s optimistic outlook is therefore likely to lead to another decision to continue the current pace of bond-buying.
…
Aside from those who have a political stake in proving its success (e.g. those who work in the banking industry or at the Fed), are there any economists remaining who claim that quantitative easing worked?
I still have zero understanding of why the Fed ever needs to or would want to unwind its balance sheet. The MSM steadfastly perpetuates the myth.
Capital Flows, Contributor
Op/Ed
9/22/2013 @ 9:00AM
As Bernanke Doubles Down On ‘Greenspan Put,’ Larry Summers Exhales
By Wayne Bough
Lawrence H. ‘Larry’ Summers, former U.S. Treasury. (Image credit: Getty Images via @daylife)
In a press conference on Wednesday, Federal Reserve Chairman Ben Bernanke announced that the Federal Open Markets Committee (FOMC)—the branch of the Fed that sets critical interest rates—has decided to continue the Fed’s purchases of mortgage-backed securities and longer-term Treasuries, to the tune of $85 billion a month. Given the sluggish economy, persistently high unemployment and the potential fallout from the congressional fight over the debt ceiling, the Fed has determined now is not the time for tapering.
The world’s financial markets bounced back quickly after this announcement. But this retrenchment to “highly accommodative” or easy monetary policy is a turnaround from an earlier meeting in July, when Bernanke suggested it might be time to begin tapering the Fed’s purchases—an announcement that sent shockwaves through the market. While Bernanke’s latest announcement of continued easy monetary policy gave the markets a temporary boost, it leaves larger questions unanswered: What happens when the Fed does taper off its purchases? Even more importantly, how does the Fed unwind the current holdings on its balance sheet?
…
Has there ever previously been such a politicized Federal Reserve Chair appointment process? I certainly can’t recall any.
Hillary and Janet in 2016!
Sept. 21, 2013, 2:57 p.m. EDT
Bill Clinton backs Yellen for Fed chair: report
By MarketWatch
NEW YORK (MarketWatch) — Former President Bill Clinton said Janet Yellen would be an excellent Federal Reserve chairman, but also defended the track record of his former Treasury Secretary, Lawrence Summers, who withdrew his name from consideration last weekend, according to a Saturday news report. “I also consider Janet Yellen a friend and I think she has shown good judgment,” Clinton said, according to Bloomberg, which cited an interview with CNN that’s scheduled to air on Sunday. Yellen has “been right on everything that’s happened in this whole aftermath of the financial crisis. So if she gets the job, I’ll be thrilled too,” he said.