The Housing Bubble

Comment by Ben Jones
2013-10-07 22:08:21

‘investors are freaking out’

This thing has turned and everybody on the ground knows it. As one article I’m got saved says, the handwriting is on the wall, ceiling and floor.

Foreclosure Auction Report:
last 30 days, Volusia County, FL
347 auctions,
43 to third party, mostly LLC’s, REITs
2 to private individuals

anecdotal, but empirical evidence from last month shows a decline of about 30% in third party purchases. When AMH, BX, and WAC start to tank, watch out below. Already, AMH is below its IPO, and that was only two months ago. It spiked recently, when all of the media hype on the booming rental market hit the airwaves. Probably the brokerage houses pumped the shares into unsuspecting pension plans and sheeple portfolios to get them off their books, made a quick buck, and moved closer to the exit.

“… anecdotes on this.”

American Homes 4 Rent (AMH) announced today that it is going back into the market to get some more money; It wants to sell 4 million shares of 5% preferred stock.

On September 30 it filed to change its borrowing requirements from $500 million to $800 million and also wants to extend its repayment date.

IMO it sounds as if AWH might be experiencing a wee case of lackofmoney.

Work was completed two months ago on the luxury apartment conversion of the old grist mill warehouse in the village. A store front on Main St was dressed up as a rental office. There aren’t any cars parked at the place.

Investment Banking
October 7, 2013, 8:52 pm
Little Fear on Wall St. of Default, at Moment
By NATHANIEL POPPER

Jacob Lew, the Treasury secretary. The Obama administration and House Republicans are at an impasse over the debt ceiling.
Alex Wong/Getty Images

Wall Street is showing few signs so far that it is fearing the financial panic it has been predicting should the government default on its debt.

The fiscal impasse in Washington continued to weigh on stock prices on Monday, as the market’s “fear gauge,” the C.B.O.E. volatility index, jumped 15.95 percent to its highest level since June. Nonetheless, the market reaction to date has been muted compared with past crises.

“We all tell ourselves, ‘This is something that is not going to happen,’ ” said David Coard, the head of fixed-income trading at the Williams Capital Group. “This would be like a black swan event — it’s not something that you would have thought that the U.S. could do in a million years.”
…
Related Links
Graphic Graphic: Will Treasury Pay?
Default Threat Generates Fear Around Globe
Sorkin: No Way U.S. Would Allow Debt Default? Don’t Bet on It

A one-month shutdown risks triggering 20% to 30% correction: Barry Ritholtz
October 7, 2013, 4:36 PM

A government shutdown that drags on for a month or longer could trigger a 20% to 30% correction in the market, Barry Ritholtz said in an interview with Yahoo Finance.

The U.S. is kicking off its second week of a partial shutdown, and the heated rhetoric spewing from politicians on both sides of the aisle doesn’t bode well for the chances of a speedy compromise. (Indeed, things were so hunger-inducing in Washington, D.C. on Friday that President Barack Obama and Vice President Joe Biden walked over to a nearby shop for hearty sandwiches.)

After three or four weeks, the shutdown would “take a big chunk” out of gross domestic product, chip away an consumer confidence and “really have an impact on earnings,” Ritholtz said. “Earnings are at a very high cyclical level,” he said in an interview posted Friday. “And if we do anything to damage that, you risk a 20% to 30% correction in the market if this goes on for a month or longer,” he said.
…

Social Security issues debt-ceiling warning
October 7, 2013, 3:24 PM
By Matthew Heimer

The federal government shutdown hasn’t affected Social Security benefits. But it’ll be a different story if the government doesn’t raise the debt ceiling, according to the Social Security Administration. The Wall Street Journal’s Damian Paletta reports today that the administration has begun warning consumers who call in to ask about the effects of the shutdown that if Congress and the White House don’t reach an agreement to increase the government’s borrowing limit, it can’t guarantee that benefits will be paid in full.

The government is expected to hit the current federal debt limit on Oct. 17. If the ceiling isn’t increased, the government will be limited to spending only the cash it has on hand and coming in the door, and the Treasury Department will have to decide who gets paid and who gets left in the lurch. (Interest payments on the existing federal debt would be likely to get top priority.) A Social Security spokesman tells Paletta that the agency began issuing its warning to retirees and other inquiring parties after consulting with Treasury officials.
…

‘Saturday Night Live’ recap: Miley came in like a wrecking ball
By Hillary Busis on Oct 6, 2013 at 8:03AM

Say what you will about Miley Cyrus, but you’ve got to admit a few things: One, the girl clearly has a healthy sense of humor.
…
Best Sketch

From the first shot of John Boehner snapping in a gold grill to the last image of Michele Bachman groping the Speaker over his mesh bra top, SNL‘s near shot-for-shot remake of Cyrus’s surreal “We Can’t Stop” video — remade as a celebration of the government shutdown — was damn near flawless. Before you check it out (again or for the first time), try rewatching the original. It’ll make you fully appreciate how brilliantly this short twists that clip’s bizarre imagery, from its french fry White House to elephant bleeding Pepto Bismol to the smoke radiating from Uncle Sam’s crotch. There’s also a gratuitous Taran Killam butt shot. Oh, and the parody’s lyrics aren’t bad either. (Best part: “And everyone in line for early childcare/Anyone who planned to see a grizzly bear/We are all shut down here…”)
…

Is there any American sufficiently dumb to not realize this “crisis” was manufactured months ago by Republican party planners?

A Federal Budget Crisis Months in the Planning
By SHERYL GAY STOLBERG and MIKE McINTIRE
Published: October 5, 2013

“You are here because now is the single best time we have to defund Obamacare. This is a fight we can win.” SENATOR TED CRUZ, speaking in August to a Heritage Action gathering in Dallas
Michael Stravato for The New York Times

WASHINGTON — Shortly after President Obama started his second term, a loose-knit coalition of conservative activists led by former Attorney General Edwin Meese III gathered in the capital to plot strategy. Their push to repeal Mr. Obama’s health care law was going nowhere, and they desperately needed a new plan.

Out of that session, held one morning in a location the members insist on keeping secret, came a little-noticed “blueprint to defunding Obamacare,” signed by Mr. Meese and leaders of more than three dozen conservative groups.

It articulated a take-no-prisoners legislative strategy that had long percolated in conservative circles: that Republicans could derail the health care overhaul if conservative lawmakers were willing to push fellow Republicans — including their cautious leaders — into cutting off financing for the entire federal government.

“We felt very strongly at the start of this year that the House needed to use the power of the purse,” said one coalition member, Michael A. Needham, who runs Heritage Action for America, the political arm of the Heritage Foundation. “At least at Heritage Action, we felt very strongly from the start that this was a fight that we were going to pick.”
…

A Morgan Stanley buy, Alcoa’s report and the streaker opens up
October 8, 2013, 6:41 AM
By Shawn Langlois

The fact that the market is still ambling along with only the slightest hitch in its giddy-up is a testament to the faith investors have in the ability of stocks to get cranking up again once this shutdown finally ends.

Perhaps the tepid selling is also a reason there’s not more urgency among politicians to reach a deal. No matter how long we have to wait for the jamokes in D.C. to stop the madness, the day will eventually come. When it does, pent-up buying will arrive with it.

That’s one way to look at it. Another would be John Hussman’s way.

“We face a combination of unfavorable valuation and still unfavorable market internals,” the longtime bear wrote in his weekly comment. “We haven’t ruled out the possibility of a speculative blowoff, but that’s a risk best treated as something to be insured against than something to be anticipated.”
…

The longer shutdown squabbling goes on, the better: RBC Capital’s Porcelli
October 7, 2013, 10:25 AM
Bloomberg
John Boehner, Nancy Pelosi

As the second week of the shutdown gets underway, to the tune of shrill selling across global markets, a novel approach comesfrom RBC Capital Markets on Monday: Let the politicians keep squabbling, we’re better off in the long run.

Chief U.S. economist Tom Porcelli explains:

It may sound perverse, but the longer the government remains dark, the better. We believe the longer the bickering/negotiating (depends who you ask) lasts, the greater the likelihood both the shutdown and debt ceiling issues get resolved. Letting lawmakers hash out their differences under a relatively benign government shutdown creates an opportunity for a quicker resolution on the looming debt ceiling crisis.

Porcelli estimates the U.S. will hit that debt ceiling by Halloween, meaning investors should expect this impasse to last. But even if the market and Jack Lew are getting nervous, he maintains the odds of a Treasury default are near zero. He notes clients are putting in default-oriented trades, as a way of hedging against a default rather than reflecting the belief that a default is going to happen. But these trades should taper off soon, with flows then heading the other way.
…

US shutdown: what will happen and who will it affect?
Heather Stewart
The Observer, Saturday 5 October 2013 13.29 EDT
…
Have the markets panicked?

Not exactly. Initially, Wall Street reacted quite calmly, as investors calculated that even a brief shutdown could prompt the Federal Reserve to postpone any decision to start phasing out its $85bn-a-month quantitative easing scheme. Since markets love the cheap money the Fed pumps out through QE, they saw a postponement of so-called “tapering” as good news.

By Friday, however, when the shutdown had proved to be more than a 24-hour flash in the pan, investors had begun fretting about the deadline of 17 October, by which time Congress must agree an increase in the government’s debt ceiling or Washington may start to default on some of its debts. That had seemed unthinkable, but the poisonous political standoff over the shutdown made it seem like a real possibility. Perhaps not surprisingly, the yield, or interest rate, on short-term government bonds jumped: a signal that investors had begun pricing in a tiny risk of default. Jack Lew, Barack Obama’s treasury secretary, warned in an article that “if the US cannot pay its bills in full and on time, each and every American will be affected”.
…

I know Republican pols generally dislike the Fed’s quantitative easing policy. Do you think they realize their current actions may increase the chances QE3 may never be tapered?

Oct. 8, 2013, 8:31 a.m. EDT
Meanwhile, back at the Fed …
Commentary: If the shutdown wears on, expect more Fed stimulus
By Irwin Kellner, MarketWatch

PORT WASHINGTON, N.Y. — You can forget about the Federal Reserve tapering its purchases of long-term securities. The way things are going inside the Beltway, the Fed may well have to ramp them up, instead.

The government shutdown has halted many functions, among them data generation. Most of the data economists and policy makers live by emanate from Washington’s statistical mills. I am referring, of course, to the Bureau of Labor Statistics, the Census Bureau and the Commerce Dept., to name three. All of these are closed.

Besides releasing its own data on consumer credit, bank loans and flows of funds, the Federal Reserve is a heavy user of stats generated by other government agencies, especially those dealing with the labor market.

Central bankers rely on government data to guide them in conducting monetary policy. Simply put, under its chairman, Ben Bernanke, the Fed has become data-driven.

As you know, monetary policy has long been preoccupied with boosting economic activity. Back in the spring, however, Bernanke and others hinted that the time was fast approaching when the Fed needed to dial policy back a smidgeon.

Central bankers said their decision to cut back their easing would be based on the jobless rate and the inflation rate reaching certain targets. Now, with the government closed, no data means no taper.

In the great scheme of things, the government shutdown is no big deal. As a matter of fact, I can recall times when both Wall Street and Main Street would cheer whenever Washington was shut – it meant less opportunity for the pols to do mischief.

I don’t know any more than you how long the government will remain shut, but even if it lasts 21 days — the longest of the 17 shutdowns since 1977 — it will only slice a half-point off GDP growth in the fourth quarter. Sixty percent of the government is open, more every day, while half of the furloughed employees have already been called back to work.

On the other hand, if the political brouhaha escalates and results in no lifting of the debt ceiling, the Fed will probably have to inject more money into the economy, not less. This is because such a development will put us into uncharted territory, in terms of what might happen to the financial markets both here and abroad.

Long before this happens you may expect the stock market to take a header. This will be a signal in no uncertain terms that the pols need to get their act together.
…

ft dot com > World > US >
US Politics & Policy
Last updated: October 8, 2013 7:37 am
China and Japan warn US on default
By Tom Mitchell in Beijing, Gina Chon in Washington, Ben McLannahan in Tokyo and Paul J Davies in Hong Kong
Clouds fill the sky in front of the U.S. Capitol on October 7, 2013 in Washington, DC. Democrats and Republicans are still at a stalemate on funding for the federal government as the shut down goes into the seventh day
©Getty

China and Japan ratcheted up pressure on the US to avoid an unprecedented US default on its debt as Democrats and Republicans continued their stand-off over the budget in the second week of a US government shutdown.

Two senior White House economic officials said on Monday that President Barack Obama would not back down from his refusal to negotiate with Republicans in Congress, increasing worries that the debt ceiling limit would be reached on October 17 without an agreement, raising the threat of a default.

In its first official reaction to the US political stalemate over the budget and looming debt ceiling deadline later this month, Beijing said “the clock is ticking” and urged politicians in Washington to “ensure the safety of the Chinese investments”.

Zhu Guangyao, vice-finance minister, told a media briefing that China has made clear its unease over the political impasse in Washington. In Japan, the Ministry of Finance is very worried about the potential impact on currency markets, according to a senior official. A US default could cause investors to dump the US dollar, which would sharply push up the value of the yen.

On Tuesday Japan’s finance minister Taro Aso called on “the United States to resolve its debt ceiling stand-off without delay”.

The absolute value of US bonds held by the Japanese government could decline if the situation was not brought to a swift end, he added.
…

ft dot com
Markets Insight
October 8, 2013 9:46 am
US default would send markets into a panic
By John Plender
Economic impact could send US back into recession

Is the US the new Italy? Certainly it is demonstrating comparable levels of political dysfunctionality with the government closure and debt ceiling fiasco. Or is the more appropriate parallel Belgium, which recently spent the best part of two years without political leadership as politicians bickered and prevaricated over the formation of a government?

Happily, neither comparison is entirely apt because the US remains a huge, flexible economy with far greater growth potential and a more manageable burden of public sector debt. For such an obviously creditworthy country to default would be almost surreal. Suggestions that default would wreak havoc on the scale of the Lehman Brothers collapse in 2008 are thus wide of the mark, not least because there is no solvency issue.

That said, if the Republican strategy leads to sovereign default it would amount to a disastrous case of burning down the house to roast the pig. Default in the largest sovereign bond market in the world – a possible consequence of a failure to lift the debt ceiling – would surely lead to extreme bond market volatility and a nasty fall in equities.

And unlike the comparable panic over the debt ceiling in 2011, the eurozone sovereign debt crisis is in abeyance, so the safe haven quality of US Treasuries will look less compelling to foreign creditors. Then there will be serious real economic effects. Declining business confidence together with a tough fiscal squeeze would return the country to recession, especially if President Obama squeezes exceptionally hard to avoid a default.
…

Let me see if I understand this correctly:

The U.S. government is going to cut back on the amount of money it is spending - not the amount of money it is taking in, the amount of money that it is spending. And because it is going to do this it will not have the money to make good on its commitments and thus will default on these commitments.

Does anyone here on the message board, besides myself, think this concept is nuts?

IMF cuts global growth forecast, warns of prolonged stupor
WASHINGTON | Tue Oct 8, 2013 9:02am EDT

The International Monetary Fund (IMF) logo is seen at the IMF headquarters building during the 2013 Spring Meeting of the International Monetary Fund and World Bank in Washington, April 18, 2013. REUTERS/Yuri Gripas

(Reuters) - The International Monetary Fund trimmed its forecasts for global output on Tuesday for the sixth time since early last year, saying stronger growth in most advanced economies would fail to make up for a more sluggish expansion in the developing world.

Prospects for emerging markets, long the engine of the global recovery, have dimmed somewhat with both structural and cyclical factors at play, the IMF said in its latest snapshot on the health of the global economy.

The United States is driving much of the global recovery and U.S. output should pick up further next year - as long as politics do not get in the way, the IMF said, referring to a looming standoff over the nation’s $16.7 trillion debt ceiling.

“A failure to promptly raise the debt ceiling, leading to a U.S. selective default, could seriously damage the global economy,” the IMF warned in its latest World Economic Outlook, released ahead of its twice-yearly meetings later this week.
…

When will Congress feel pressure to end the shutdown? It could take weeks.
By Brad Plumer, Published: October 3 at 10:57 am

We’re already seeing the effects of the government shutdown. More than 700,000 federal workers have been sent home without pay. National parks and memorials are barricaded. The National Institutes of Health is turning away cancer patients from clinical trials.

But when do these effects become so overwhelming that the political pressure on Congress becomes unbearable? How long can members of Congress hold out before they simply have to reach a deal and end the shutdown?

That’s a harder question, and there’s reason to think that Congress can hold out for quite some time — a week, perhaps more. During the last shutdown in 1995-96, only a small portion of the country felt the impacts at first. It wasn’t until contractors and businesses started laying people off that the political pressure became more acute. That could take awhile.

On the flip side, however, the shutdown will become increasingly painful and politically volatile as it drags on. If the impasse extends past the middle of the month, millions of paychecks will get delayed and veterans’ benefits could get disrupted. So it’s not clear Congress and the White House can hold out forever, either.
…

Best idea for quickly ending the shutdown: Hit rich guys in the wallet.

Capitol Report
Why a Wall Street drop may be needed to break political logjam
October 8, 2013, 10:25 AM

The markets are watching the politicians. The politicians are watching the markets. Sort of.

As opposed to the last time the U.S. was playing default brinkmanship, there seems to be little panic among some lawmakers this time. A fresh Reuters report finds many in the GOP don’t really believe a default is coming, ‘Hey, the U.S. doesn’t have to pay all of its bills on time,’ as a way of playing hard ball with the White House. Jack Lew, we aren’t afraid of you.

And maybe some politicians aren’t too scared of the markets either, at least they’re not showing it yet.

The S&P 500 (SPX -0.67%) sold off sharply during the last round of brinkmanship over a debt default (see chart). The index fell to a four-week low and the CBOE’s VIX (VIX +1.24%) “fear” gauge reached its highest levels since June on Monday, but things have not exactly been crazy since this whole mess started. BTIG’s Dan Greenhaus notes the S&P 500 is down in ten of its last 13 sessions, a drop of 2.9%, which he describes as “modest.”

Here’s a favorite saying these days among market players: “We’ve seen this movie before, we know how it ends.” So the markets are sure a deal will be reached, just as some politicians at least appear to feel no urgency.

But is it possible that maybe Wall Street needs to kick up a little more fuss to help get the ball rolling on Wall Street? Writing for New York Times’s Dealbook, Nathaniel Popper says some are worried the reaction among investors has been way too calm, and that the markets aren’t going to signal to politicians just how dangerous a debt ceiling breach is until it’s too late.

“The markets are sending this complacent message, and I think the politicians are interpreting it incorrectly and they have no sense of urgency,” said Douglas Kass, the owner of the hedge fund Seabreeze Partners Management.

So what’s the solution? A sell-off to kick those politicians into gear?
…

HEARD ON THE STREET
October 7, 2013, 12:28 p.m. ET
Economy Won’t Just Bump Head on Ceiling
Estimating the Economic Effects of the Government Shutdown Is Fairly Straightforward; Not So the Havoc That Could Be Wrought by the Debt-Ceiling Fight
By JUSTIN LAHART
CONNECT

The government shutdown set economists to calculating just how much it would undermine growth. The debt-ceiling fight hasn’t sparked the same sort of effort—but not because people aren’t itching to know how badly it could hurt the economy.

Coming up with an estimate for how much the shutdown will affect gross domestic product is a fairly mechanical process. The 1995-96 shutdown provides a guide for how lost government output will affect the economy, and you can throw in added drag from lost business and consumer confidence. Most economists reckon the shutdown will shave 0.1 to 0.2 percentage point off annualized fourth-quarter GDP.

In contrast, how badly the debt-ceiling fight might damage the economy is impossible to quantify. But qualitative assessment is easy: It could really, really hurt.

The only guide to the potential impact of the fight over raising the government’s borrowing limit is the debt-ceiling standoff that buckled markets in summer 2011. That was a major blow to confidence.

The Thomson Reuters/University of Michigan index of consumer sentiment fell sharply, and the Institute for Supply Management’s manufacturing and nonmanufacturing activity indexes slumped. That June, economists polled by The Wall Street Journal had estimated third-quarter 2011 GDP would grow at a 3.3% annual rate; the data now show it grew just 1.4%.

But the 2011 experience offers only a rough map for how the current fight might affect the economy. For starters, damage from the debt-ceiling fight will intersect with damage the shutdown is already causing. Indeed, even though worries about the debt-ceiling have yet to really heat up, Gallup’s daily measure of consumer confidence has measured nearly as steep a drop over the past month as it did during the 2011 debt-ceiling fight.
…

Fed Tapering Is Key Downside Risk for Emerging Asia, OECD Says
By Sharon Chen - Oct 8, 2013 12:00 AM PT

Emerging Asia’s medium-term economic growth faces risks from the paring of monetary stimulus by the U.S. Federal Reserve, the Organization for Economic Cooperation and Development said.

Policy makers in the region, which includes Southeast Asia, China (CNGDPYOY) and India, will continue to face the challenge of managing international capital flows while ensuring sustainable growth, the Paris-based OECD said in a report released in Brunei today.

The World Bank yesterday cut its growth forecasts for developing East Asia this year and next, citing risks to the global recovery including the Fed’s tapering of its monthly asset purchases. Emerging-market stocks plunged after May 22, when Fed Chairman Ben S. Bernanke said for the first time it could withdraw stimulus, and then rebounded after the Fed decided last month to continue its quantitative-easing program.

“One of the key imminent downside risks facing emerging Asia is volatility in the financial markets, triggered by the prospects of tapering of quantitative easing policy in the U.S.,” the OECD said. There are signs of macroeconomic weaknesses, particularly in India and Indonesia, where persistent current-account deficits are a concern, it said.
…

OLITICS
October 7, 2013, 8:27 p.m. ET
Top Bankers Warn on U.S. Debt Proposal
Finance Executives Warn Any Effort to Pay Bond Interest Before Other Obligations Could Pose Risk to Markets
By DEBORAH SOLOMON and DAN STRUMPF
CONNECT

Top Wall Street executives are warning that any effort to pay interest on U.S. debt before other obligations such as Social Security, a strategy some lawmakers think would placate bond investors if the government breaches its borrowing limit, would pose severe risks to financial markets and the economy.

In recent meetings with Republican lawmakers and Obama administration officials, chief executives of the nation’s largest financial institutions said putting some payments ahead of others would create insurmountable uncertainty for investors, drive up borrowing costs and cause market disruptions, according to people familiar with the meetings.

The Wall Street pushback against an idea backed by the House GOP is part of an effort to force a resolution on raising the nation’s borrowing limit, which the Treasury has said it expects to reach by mid-October. If no deal is reached, many outside observers, including debt-ratings firms, assume the government would begin prioritizing payments to bondholders over others, such as Social Security recipients or veterans, rather than risk defaulting on U.S. debt.

Market participants say while the U.S. might not technically default on its debt, missing any type of payment would likely harm the economy. “This is going to be permanently damaging for business and consumer confidence if this happens. People will never look at the United States Treasury the same ever again,” said Tom Simons, money-market economist at Jefferies Group LLC, an investment bank.

The fast-approaching deadline, paired with the inability of Republicans and Democrats to make headway in resolving it, is starting to ripple through global markets that until recently had appeared blasé.

Stocks fell Monday, with the Dow Jones Industrial Average down 136.34 points, or 0.9%, to 14936.24. U.S. Treasury notes, seen as a haven in times of volatility, rose, as did the price of gold. The Chicago Board Options Exchange’s Volatility Index, a gauge of fear in the stock market, rose 15%. Early Tuesday, markets in Asia fell slightly, with the Japanese benchmark index down 0.4%.
…

It must be a sad day on Wall Street to witness politicians from flyover country waterboard asset prices.

12:22 pm Oct 8, 2013
Markets
Chart of the Day: T-Bill Tensions Mount
By Cynthia Lin

The broader safe-haven Treasury market might not be showing much anxiety at the moment, but the government shutdown continues to chip away at appetite for short-term Treasury bills, known as T-bills.

T-bills maturing around Oct. 31 declined in price on Tuesday, sending the one-month yield as high as 0.322%, the highest since 2008. The yield started the month at 0.02%. Worries about the government shutdown delaying an agreement to lift the debt ceiling is keeping conservative money managers away from short-term bills, as they worry that the U.S.’s inability to borrow more money may delay payments on debt due in the coming month.

Investor concerns seem to be limited to these securities at the moment, even as little evidence exists that Republicans and Democrats will hammer out a compromise on the partial government shutdown. The yields of longer-term bills, those maturing in three, six and 12 months, remain near zero, and the yield on the 10-year note has been holding steady, recently 2.63%.

Adding to worries were the results from a poor four-week Treasury bill auction, illustrating how this is an inopportune day for the US government to be raising one-month debt.

The $30 billion offering attracted a meager 2.75 cover ratio, the lowest since March 2009. Buyers who are willing to stomach a potential delay in payment remanded a 0.35% yield. That’s up from the 0.12% rate demanded at last week’s 4-week bill sale.

“The four-week bill auction went remarkably bad,” Stone McCarthy Research Associates said in a note to clients.

Stocks are also getting hit again. The Dow is on track for its 11th decline in the past 14 days and has fallen by more than 5% off last month’s record high. Andrew Wilkinson, chief economic strategist at Miller Tabak & Co., attributed the stock market’s latest leg lower to the poor Treasury bill auction.
…

This whole episode brings back childhood memories of one of those playground imbroglios where you end up on the ground, locked in a clench with your worst enemy, with no clear winner, at the point when your teacher steps in to send you both to the principal’s office.

WORLD NEWS
Updated October 8, 2013, 10:42 a.m. ET
U.S. Gridlock to Be Focus of IMF Meeting
Top Officials from Around the World Will Survey Threats to the Global Economy
By THOMAS CATAN
CONNECT

WASHINGTON—The International Monetary Fund’s annual meetings are often an opportunity for top finance officials from around the world to survey the threats to the global economy. This week, as they converge in Washington for their global gabfest, the focus will be firmly on the risks posed by their host country.

“Against a backdrop of renewed policy uncertainty, the U.S. fiscal debate will likely serve as the key focal point of the discussions,” Royal Bank of Canada said in a note to investors.

While international financial officials are concerned that the continuing partial government shutdown could hurt the U.S. economy, many view it as a largely domestic political issue.

Not so the debt ceiling. International officials fear potentially catastrophic consequences if the U.S. Congress fails to lift the federal borrowing limit later this month. The Treasury Department has said that no later than Oct. 17 it will only have $30 billion in cash, and the Congressional Budget Office has said that money will be exhausted in one or two weeks. After that point, Treasury is expected to start falling behind on its bills, which include interest on its debt as well as Social Security benefits, vendor payments and veterans’ pensions.

Republicans and Democrats are gridlocked over the terms of raising the debt cap.

Many economic officials think if the U.S. defaults on its debt, the global economy could suffer a financial heart-attack that would eclipse the failure of Lehman Brothers five years ago. Many attending the meetings this week will likely take the opportunity to berate the U.S. for placing the global recovery at risk, particularly because many of them have been lectured by the U.S. on their economic management in the past.

“The government shutdown is bad enough, but failure to raise the debt ceiling would be far worse, and could very seriously damage not only the U.S. economy, but the entire global economy,” IMF Managing Director Christine Lagarde said in a speech last week.
…

TODAY’S MARKETS
Updated October 7, 2013, 6:35 p.m. ET
Stocks Finish Lower as Shutdown Continues
Treasurys, Gold Rise as Impasse Enters Second Week
By ALEXANDRA SCAGGS and CAROLYN CUI
CONNECT

With no end in sight to the stalemate in Washington, global stock markets slid and investors sought out the safer havens of gold and some government bonds.

Traders stressed that conditions across financial markets remained calm, and many investors said they were hopeful that the deadlock in Congress, which has led to the first partial federal government shutdown in 17 years, would end in time to avoid the Treasury Department failing to make payments on U.S. government debt.

But the uncertainty over how the political battle will play out was enough to send U.S. stocks to their 10th decline in the past 13 sessions. The Dow Jones Industrial Average fell 136.34 points, or 0.9%, to 14936.24, its lowest level in a month. The blue-chip index stands 4.7% below its record reached Sept. 18.

Markets in Europe and Asia also declined. The Stoxx Europe 600 fell 0.2% to close at its lowest level in a month amid the U.S. debt worries. Japan’s Nikkei Stock Average shed 1.2% after falling 5% last week.

While investors expressed annoyance with the political brinkmanship, the main concern was the possibility that the U.S. will hit the federal debt ceiling and default.

“The odds of a default are very small, but the consequences wouldn’t be pretty,” said Bob Baur, chief global economist at Principal Global Investors, which manages $289.1 billion. Mr. Baur said he hasn’t been making defensive moves and instead has been taking advantage of the market’s recent weakness to buy stocks that will perform well in a strengthening economy.

But for the most part, investors expect the situation will be resolved without a default. “In spite of all the talk, they will come to an agreement and move on,” said Margie Patel, senior portfolio manager with Wells Capital Management who manages $1.5 billion. “I’m not especially worried about it. People would like to see a bigger [pullback] so they can buy.”
…

How much does the stock market have to fall to knock some sense into Washington?
October 8, 2013, 12:01 PM

A growing chorus of commentators Tuesday suggested that Washington won’t get its act together until Wall Street throws a hissy fit.

Thus far, however, the CBOE volatility index (VIX +4.28%), aka the fear index, hasn’t even topped 20, and it’s still below the year’s high hit in June, when the Fed started hinting it might begin tapering its QE purchases.

In addition, the (S&P 500 SPX -0.78%) is only about 3% off its all-time high close to 1,730, set last month.

For investors sitting on billions in cash, however, a market break would present a buying opportunity, so perhaps it is just as well that Washington’s finest continue to channel their inner kindergartners.

In the meantime, assuming you agree with the notion that a market break will be needed to get politicians to notice their failures have real consequences, how big a drop in stock prices would it take?

Oct. 8, 2013, 12:36 p.m. EDT
This is what decline of a superpower looks like
Commentary: Government shutdown hastens the long-predicted decay
By Darrell Delamaide

WASHINGTON (MarketWatch) — Foreign policy analysts at home and abroad have been predicting for years the inevitable decline of American power, often with a fair amount of schadenfreude and sometimes even with glee.

But now that political dysfunction in Washington is accelerating, the downsizing of the world’s only remaining superpower, all you hear is whining.

“The American self-blockade is shocking,” Karl-Georg Wellmann, a foreign-policy expert for German Chancellor Angela Merkel’s Christian Democratic party, complained to the business daily Handelsblatt. “The position as the West’s leading power will be affected.”

Europeans are particularly unhappy that the government shutdown in Washington has led to a postponement of talks on a new trade agreement with the European Union due to take place this week.

Asians also were unhappy that President Barack Obama canceled his appearance this week at two summits in that region, leaving a Pacific trade agreement twisting in the wind and giving China an opportunity to win friends and influence people.

So what did you expect American decline to look like?
…

President Obama urged Speaker Boehner to allow a vote to end the government shutdown, saying that each congressman should have the choice to show where they stand. VPC
David Jackson, USA TODAY 4:22 p.m. EDT October 8, 2013

President Obama said Tuesday his staff is “exploring all contingencies” to avoid a government default, but stressed that Congress can head off economic calamity by simply raising the debt ceiling.

“There is no magic wand that allows us to wish away the chaos that could result if — for the first time in our history — we don’t pay our bills on time,” Obama said during a news conference at the White House.

On the eighth day of a government shutdown, Obama used the traditional forum of a news conference to deliver a familiar message to House Speaker John Boehner and other congressional Republicans: No negotiations until the government is re-opened and the debt ceiling is risked.

As Republicans insist on delaying parts of his his health care plan as part of any new spending plan, Obama said that “we can’t make extortion routine as part of our democracy.”

Obama addressed reporters a few hours after delivering the same news to Boehner in a morning phone call.

During the news conference, Obama said:

– The shutdown forced him to skip an economic summit in Asia, giving China and other trade competitors the chance to say the U.S. doesn’t have its act together.

“I’m sure the Chinese don’t mind that I’m not there,” Obama said, though he added he doesn’t think his absence will do “lasting damage.”

– Suggested the Supreme Court uphold new rules on political campaign contributions as part of a pending case; Obama has criticized previous court rulings in campaign finance cases.

– Vowed that recently captured al-Qaeda suspect Abu Anas al-Libi will be brought to justice in connection with the 1998 bombings of U.S. embassies in Africa.

While calling for an immediate end to the shutdown, Obama is also looking toward an Oct. 17 deadline for increasing the nation’s $16.7 trillion debt ceiling, the law that gives the government authority to borrow money to pay its bills.

Refusal to raise the debt ceiling would lead to default, Obama said.

The president criticized congressional Republicans for suggesting that the government could get around default, or defer some bills. He said that’s like saying, “we should test it out — let’s take default out for a spin and see how it rides.”

Noting that the GOP has traditionally been the party of business, Obama said “there’s no businessperson out here who thinks this wouldn’t be a big deal, not one.”
…

Last updated: October 8, 2013 3:07 pm
Big US data gaps start to unsettle market
By FT reporters

Idle federal workers are not the only ones feeling the strain from the US government shutdown, now in its second week. Investors are, too.

Washington’s role as official data provider, regulator and policy maker is on hold. That, as well as the separate risk of failure to raise the debt ceiling possibly triggering a US default, is beginning to unsettle financial markets.

Holes in the economic calendar have robbed traders of opportunities, causing volumes in some areas of the markets to nosedive. CME eurodollar futures volume totalled just 1.5m contracts on Friday, when the government’s employment report would normally have been released. Some 3.8m contracts were traded when the monthly report was last released in early September.

The disruption has wider implications. Since the monthly payrolls data also inform the Federal Reserve’s decisions on monetary policy, a sustained absence could lead to delays in any slowing – or “tapering” – of the central bank’s emergency asset-buying programme.

David Ader, strategist at CRT Markets, says the delay in the data “makes it unlikely the Fed will have enough information to make any tapering decision in October.”

In corporate debt markets, too, new offerings have fallen sharply. Borrowers have sold about $11.5bn of investment-grade bonds in the US in the first week of October, down from $35bn in the preceding week, according to Dealogic.

In the “junk” bond market, sales have collapsed, with only four deals worth $1.1bn taking place, down from $17.8bn in the last week of September.

Analysts say the shutdown has made it harder to gauge the future path of interest rates, a crucial consideration for investors and companies wanting to borrow large sums.

“Markets have become very thin and not having access to data, such as the monthly payrolls report, changes the dynamics of trading,” says Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi.

US stocks have so far showed little reaction to the budget impasse. The benchmark S&P 500 index has declined just 0.3 per cent since last Monday.

However, the CBOE Volatility Index (Vix), a measure of implied volatility called the Wall Street “fear gauge”, has jumped 35 per cent in the past 10 trading days to its highest since June. Richard Repetto, analyst at Sandler O’Neill, says that a jump in Vix futures contracts trading has proven the exception to a slight across-the-board decline in exchange volumes.
…

It’s a lucky thing the red-hot summer sales season is over; otherwise this sudden severe squeeze on the number of FHA employees available to process mortgage loans could be a worrisome development.

Save Money / Consumer News
Government shutdown puts squeeze on home sales
Monday, October 07, 2013
Rudabeh Shahbazi

SUN VALLEY, LOS ANGELES (KABC) — More fallout from the government shutdown: Home sales are cooling off, stalled by slower loan processing. And it could get much worse. The government shutdown is creating trouble in the recovering housing market. It’s slowing home sales, and in some cases making potential buyers think twice.

Real estate agent Candy Peak says that due to the government shutdown, those in the housing market may have a harder time buying homes.

“The first thing that hit the market was the rising interest rates, but now with the uncertainty of the government shutdown, that’s putting a second layer of insecurity, and people are holding back now,” said Peak.

There are several factors involved.

One is that many Federal Housing Administration (FHA) loans, which are ensured by the government, are or will be stalled if the government remains shut down.

Mortgage broker Sanjesh Sharma says though it might not be affecting a lot of people yet, it will get much worse if federal employees continue to be furloughed.

“We’ve lowered the amount of employees from 8,709 employees down to 337 employees, so obviously when you have such a reduction in employees, you’re going to have some delays,” said Sharma.
…

How The Shutdown Will Hurt Virtually Anyone Who Lives In A Home
By Sarah Edelman on October 7, 2013 at 3:15 pm

The government shutdown and brinkmanship over the debt ceiling threatens the fledgling housing recovery by making it unnecessarily harder for borrowers to buy homes, homeowners to sell their homes, and low-income renters to stay in their homes. What may start out as a minor hiccup could ultimately have enormous social and economic costs if House Republicans continue to refuse to re-open the government.

First-time homebuyers, borrowers of color, and buyers in rural areas may be the first to feel the impact of the government shutdown. These homebuyers are more likely to rely on Federal Housing Administration (FHA) or Department of Agriculture (USDA) mortgage insurance to obtain a loan, since credit has tightened in the conventional mortgage market. During the shutdown, FHA’s single family lending is hobbling along understaffed and USDA mortgage lending has already shut down. There could be broader economic repercussions, business analysts warn, if homebuilders constructing homes for first-time homebuyers take a hit because of potential loan processing delays.

The shutdown will hit more borrowers harder if it persists. Generally, lenders must verify a borrower’s income and Social Security number with the Internal Revenue Service and Social Security Administration before a mortgage application can move forward. Although firms are scrambling to put contingency plans in place, homebuyers may still encounter glitches as they try to finalize loans or apply for a mortgage. If homebuyers can’t finalize their mortgages, they won’t be able to purchase properties.

And the consequences of the shutdown could be especially dire for renters. While funding is already approved to cover most rental subsidies in the medium-term, the Department of Housing and Urban Development may be hard-pressed to get the funds out the door to the public housing authorities who distribute the vouchers, as they are only operating with 4 percent of their staff. The two million households who rely on housing choice vouchers to stay in their homes may be in trouble if the shutdown lasts into November. Local public housing authorities, with budgets already ravaged by sequestration, could suspend issuing vouchers, or even revoke housing vouchers in some instances, to handle the new financing uncertainty created by the shutdown, according to the Center on Budget and Policy Priorities.
…

Wouldn’t a wise all-cash buyer offer less, now that mortgage-financed competition is substantially sidelined?

Government shutdown threatens housing market, mortgages
by Mark Garrison
Marketplace Morning Report for Monday, October 7, 2013
A ‘For Sale’ sign is posted in front of a house on November 27, 2012 in Los Angeles, California. According to the S&P/Case-Shiller Index, homes prices in November were up 0.6 percent from the previous month and 5.5 percent from the previous year.
Kevork Djansezian/Getty Images

Buying a home is hard enough these days, with mountains of paperwork and lenders enforcing tight standards. But it could get even worse during this month.

The government shutdown is hampering lots of different mortgage processing, and not just for Federal Housing Administration loans used by many first-time buyers with low or moderate income.

Limited staffing could potentially delay many FHA loans. But conventional loans could be slowed down as well, even for buyers with sparkling credit and orderly paperwork. With workers on furlough and some websites shut down, required IRS and Social Security verifications could be greatly delayed or impossible to get during the shutdown. Delays in financing hurt sellers and buyers alike.

“Some people aren’t in a position to wait around,” says housing economist Michael Carliner. “They’ve made other plans; they’ve sold their previous house; the lease has run out.”

That’s the position Matt Lipan and his family find themselves in. The Indianapolis family of four plans to apply for a mortgage Monday. On any other day, they would be feeling great, with their paperwork in order and buyers for their current home.

But with their loan application going in during the government shutdown, they now have additional anxiety. If unexpected delays mean they can’t close on their new home in time, they’ll have to depend on the buyers of their current home to be flexible on their existing closing date. If not, the Lipans will be looking for somewhere to sleep.

“If they really pressed it and said we need this closing date or we walk, then I think we would find ourselves really scrambling to figure out where the four of us would end up in the meantime,” Lipan says.

He adds that the buyers — paying all cash — have been easy to work with throughout the process. But he doesn’t want a government shutdown to complicate the situation.
…

How much longer until the MSM points out the logical flaw in this rationale for currently buying?

US housing rebound likely to handle spike in rates
The Associated Press
Tuesday, Oct. 8, 2013 | midnight

When mortgage rates began climbing in May from rock-bottom lows, Kevin Williams worried he might miss out on an opportunity.

So he listed his home in Orange County, Calif., and planned to buy a bigger house in San Diego after it sold. The process took all summer. Last week, he and his wife locked in a mortgage.

The extra time added at least $1,000 more a year than if they had secured a loan in May. Still, Williams believes they made a prudent decision.

“I don’t know what rates are going to be in four years,” he said. “I felt I had to act now before I was priced out.”

Williams’ justification _ buy now or risk paying more later _ is why many brokers and analysts remain confident that the housing recovery can handle higher mortgage rates. While the jump in rates should test the strength of the recovery, analysts foresee stable sales increases over the next year for a number of reasons.

Fall is typically a sleepy time for sales and nationally signed contracts are starting to decline. Yet several brokers say buyer traffic remains strong in key markets like Los Angeles, the Washington metro area, Silicon Valley and Boston.
…

Govt shutdown shuts off some expensive mortgages
Published: Monday, 7 Oct 2013 | 2:47 PM ET
By: Diana Olick | CNBC Real Estate Reporter

CNBC’s Diana Olick reports that 2 percent of the FHA’s staff is working. Many lenders are not moving ahead on jumbo mortgage loans as the government shutdown continues.

The second week of the government shutdown is giving consumers and lenders second thoughts about the housing market. Lenders last week were giving assurances that they would use “work-arounds” for tax documentation on mortgage applications, but now the future is not quite as clear.

“As the government shutdown continues, we’ll continue to evaluate the circumstances,” said Tom Goyda, a spokesman for Wells Fargo, the nation’s largest lender.

Goyda said Wells Fargo is following guidance from Fannie Mae and Freddie Mac, which does not require IRS verification unless the borrower is financing multiple properties. If that is the case, the lender can close the deal without the verification but cannot deliver it to Fannie or Freddie without the IRS documents.

Jumbo loans (mortgages with values exceeding $417,000) are getting trickier, however. Some lenders will not do them at all without tax verification from the IRS. Others are delaying the process. They will all have to verify the tax information once the government opens again, and that’s a gamble. These loans are inherently riskier because most are held on bank balance sheets.

Wells Fargo is continuing to originate jumbo loans without tax document verification from the IRS. As for the risk it is taking on in doing so, Goyda said, “I can’t really speculate on that.”

“The industry is doing what it can to make the shutdown as seamless as possible, but some lenders are more conservative about it than others,” said Matthew Graham of Mortgage News Daily.
…

What is the U.S. Department of Agriculture’s interest in Daytona Beach condos?

USDA Buyers Stuck in Limbo as Shutdown Hurts Housing
By Prashant Gopal & Kathleen M. Howley - Oct 8, 2013 7:04 AM PT

Jacob Smith, a 25-year-old Florida firefighter, wasn’t paying much attention to the U.S. government shutdown until it threw his move to a new three-bedroom home near Daytona Beach into limbo.

Smith was ready to complete the purchase Oct. 1, the day the closure began. Now he has to wait until the Department of Agriculture reopens its mortgage business. For now, Smith’s landlord is allowing him to stay in his one-bedroom rental, crammed with boxes and furniture meant for the larger property. His builder, Adams Homes of Gulf Breeze, Florida, said it has about 10 other customers on the east coast of the state with purchases also on hold.

“It’s pretty ridiculous,” Smith said. “It seems rare that what you see on the news is directly affecting you. Hopefully it will end soon.”

USDA loans account for about 132,000 mortgages a year in areas designated by the agency as rural, according to the Mortgage Bankers Association. While they make up just 1.4 percent of the U.S. mortgage market, the product is one of the few available that allow zero-down payment loans and are an early warning of how the government’s first partial closing in 17 years could put a drag on the wider housing market.

“This is going to be devastating for people in the middle of getting USDA loans and for the communities that rely on the loans to support their housing markets,” said Camden Fine, president and chief executive officer of the Independent Community Bankers of America. “Everything has ground to a halt until the agency opens for business again.”
…

Since when was the USDA in the home lending business? And does anyone pretty much anywhere qualify?

Government shutdown stalls some federal home loans
John Henry, WBIR 12:30 a.m. EDT October 7, 2013
The shutdown has created problems for some East Tennesseans looking to get federal home loans.

(WBIR - North Knox County) The shutdown has created problems for some East Tennesseans looking to get federal home loans.

The disagreement in Washington disrupted the approval of certain federal home loans.

The Harter family in Gibbs, located in north Knox County, planned to officially gain control of their new house last Tuesday.

“We were waiting to close on a home loan and get the keys, so we were excited,” said Tammy Harter. “But, unfortunately that was delayed.”

The government shutdown went into effect the same day. The United States Department of Agriculture, which Harter planned to receive a loan from, could no longer help her.

“Frustration levels right now are very high,” she said.

It’s effectively left the Harters in limbo.
…

Where did the crazed notion originate that housing price inflation is somehow more benign than other forms of inflation?

Oct. 1, 2013, 8:30 a.m. EDT
Housing is not about to chill out
Commentary: Taper failure, low inventory keep the market hopping
By Irwin Kellner, MarketWatch

PORT WASHINGTON, N.Y. (MarketWatch) — Reports of the nascent housing boom’s demise are greatly exaggerated.

Housing is the bright spot in an otherwise moribund economy. As a matter of fact, it is almost solely responsible for keeping the recovery from collapsing altogether.

Taking all its aspects together, from new-home construction to sales of home furnishings and appliances, housing is the country’s single largest industry.

Sales of new and existing homes are rising. Even more important, prices are soaring in an otherwise low-inflation environment.

At last look, home prices were 12.4% higher than this time last year. This was the largest annual increase since 2006, when the last housing boom was in full swing.

Further increases may well be in store. Home prices on average are still more than 20% their all-time highs, which were also set in 2006. That was when the housing bubble burst, sending home sales tumbling into the basement.

Some think that they see the beginnings of another downturn. Month-to-month prices have shrunk a tad. In addition, mortgage rates have jumped by a full percentage point since May, while job growth has slowed.

But the Federal Reserve’s failure to taper its bond purchases as the markets expected sent rates down a bit, thus reigniting demand. What’s driving the housing market nowadays is the widespread belief that all manner of interest rates are lower than they will be in a year. The same belief holds true for home prices.

At any rate, lending standards are more important than rates. What matters most to would-be home buyers is how big a down payment they have to shell out. Many banks have made it somewhat easier for people to get a housing loan.

Right now, inventories of new and existing homes are depleted. This, of course, is a byproduct of the increase in demand. Rising prices should coax some additional sellers into the market even as they bite into demand.

Another reason for the strength in the housing market is large-scale purchases by investors. These are people who have no intent to occupy these houses; rather, they plan to rent them. There is plenty of demand here, more than making up for the rise in rates and the difficulty many have in snaring well-paying jobs.
…

Given macroeconomic risk of another severe leg down in home prices, isn’t this nickel and dime stuff a bit of a non-story compared to the potential magnitude of future leveraged losses?

Even for a $900K house, it hardly seems worth it to pay upwards of $90K in fees to commute 20 miles to Sac. Hate to say, but I can see why people are leaving California for Bend or Pahrump or Surprise. $90K would buy a fairly nice house in any one of a hundred Oil Cities in the East.

Why are some of the empty lots on that street $70-90K, and others $200K? I guess the $200K lots are permitted and ready-to-build?

When you can’t even get the word drivel correct, we’re suppose to believe that installation of a $200 Neptune meter is $38k?

You’re not fooling anyone here.

Bigger and bigger government with higher and higher taxes/fees and more and more regulations = Civility

“an oak tree … it will cost you another $15,000.”

I call BS on the fraudster. Google El Dorado County Oak canopy fees and you will find that the hefty fees for deforestation ($4,700 per acre) can be avoided by replanting.

Uh oh…. Got caught misrepresenting the truth again.

http://www.ci.lincoln.ca.us/pagedownloads/2013%20August%209%20RESIDENTIAL%20PERMIT%20FEES%20Verdera%20MOST%20CURRENT.pdf

The “fees” that JingleBalls is referring to has nothing to do with a building permit. They are fees for actual work. In other words, you’re not paying a contractor to do the work, you’re paying the municipality to do what you would have paid the contractor. STRIKE 1

And if you’re willing to look at the fine print, the municipality will waive the fee entirely if you opt to pay the contractor to do the work. These are not “fees”. STRIKE 2

So you see….. most here who claim these wild numbers really have no idea and there is a reason why……. They never built a thing in their life. STRIKE 3

Op-Ed Columnist
The Boehner Bunglers
By PAUL KRUGMAN
Published: October 6, 2013

The federal government is shut down, we’re about to hit the debt ceiling (with disastrous economic consequences), and no resolution is in sight. How did this happen?

The main answer, which only the most pathologically “balanced” reporting can deny, is the radicalization of the Republican Party. As Thomas Mann and Norman Ornstein put it last year in their book, “It’s Even Worse Than It Looks,” the G.O.P. has become “an insurgent outlier — ideologically extreme; contemptuous of the inherited social and economic policy regime; scornful of compromise; unpersuaded by conventional understanding of facts, evidence and science; and dismissive of the legitimacy of its political opposition.”

But there’s one more important piece of the story. Conservative leaders are indeed ideologically extreme, but they’re also deeply incompetent. So much so, in fact, that the Dunning-Kruger effect — the truly incompetent can’t even recognize their own incompetence — reigns supreme.

To see what I’m talking about, consider the report in Sunday’s Times about the origins of the current crisis. Early this year, it turns out, some of the usual suspects — the Koch brothers, the political arm of the Heritage Foundation and others — plotted strategy in the wake of Republican electoral defeat. Did they talk about rethinking ideas that voters had soundly rejected? No, they talked extortion, insisting that the threat of a shutdown would induce President Obama to abandon health reform.
…

OK, ya lost me here. Who are you referring to?

Congress is 100% protected from any prosecution or liability for torts for the actions they take while doing their jobs. Even if you could prove that a group of them were conspiring to damage your business in particular, they have no liability.

ft dot com
October 7, 2013 3:49 pm
America cannot live so carelessly forever
By Gideon Rachman
Playing Russian roulette is never advisable. Congress may find a bullet in the chamber this time
Ingram Pinn illustration

Watching the US budget crisis unfold, I was reminded of a famous passage in The Great Gatsby. “They were careless people, Tom and Daisy,” wrote F Scott Fitzgerald, “they smashed up things, and creatures and then retreated back into their money or their vast carelessness or whatever it was that kept them together.”

Right now, the Republicans and Democrats in Washington are behaving like the Tom and Daisy of global politics – a warring couple, whose rows seem more likely to damage innocent bystanders than themselves. American politicians seem confident that their nation’s wealth and power allow them to get away with careless behaviour that would be swiftly punished in a weaker and poorer country.

History suggests that this complacency is justified. Congress has played Russian roulette with government shutdowns before – and the bullet chamber has always been empty. More broadly, the 50 years since the assassination of John F. Kennedy have thrown up repeated political melodramas – from Watergate to the impeachment of President Bill Clinton. Each time, many thought that the American system was unravelling. Yet, each time, the US bounced back. For while America’s political flaws are very visible, its economic and social strengths are too easily discounted.

By contrast, foreigners have sometimes paid a heavy price for careless behaviour in Washington. It is a standard, self-pitying complaint in Brussels that the crisis in the eurozone was triggered by the collapse of a US investment bank, Lehman Brothers. A large part of the rest of the world’s grim fascination with the budget crisis reflects the fear that if the US economy catches another cold, the rest of the world will get pneumonia. China has told the US not to imperil the value of its holdings of US Treasury bills and Christine Lagarde, head of the International Monetary Fund, has warned of the damage the crisis could do to the world economy. But such complaints are drowned out by self-interested bickering in Congress.

The sense that the US is prone to “careless” behaviour that puts others at risk extends to international politics. America paid a high price in lives lost and money wasted during the Iraq war. But the US has now gone home and lost interest. Iraq, meanwhile, is still in the grip of the terrible civil conflict that followed the overthrow of Saddam Hussein.
…

You ever see a public union go on strike?

No big deal…Its Government…Endless pot of money….This one doesn’t work ?? Build another one….

Why am I not surprised?

“When I wrote about the Utah data center holding less information than was previously thought given the current limitations of technology in this space, some critics scoffed. They suggested that the NSA is far more advanced in its technology than companies like Google and Facebook with which I was drawing comparisons.”

Hah hah…that’s funny. And they are getting this technology where? This is my area of expertise, at least the storage part of it, which I believe is critical to what they are trying to do. The technology is moving too fast for special secret groups to move even faster than the market supplying Google and Facebook. Even with all the money the government might spend, industry is likely spending more and is definitely spending it much more efficiently. What is far more likely is that the NSA technology is long outdated before they can even get it implemented. Doesn’t mean it can’t do the job. Just that it’s almost guaranteed to be outdated compared to whatever Facebook and Google are doing.

“Here we have a situation where stocks are 50 percent overvalued, and people are warning that with a one month shutdown and default stocks might fall 30 percent.”

0.7*1.5 = 1.05; i.e. they would still be 5 percent overvalued after a 30% correction.

Where is the worry?

Speaking of “overvalued” assets, how about that rally in long-term Treasuries, the kind the MSM financial press was saying everyone should sell earlier this year?

This unexpected rally should get even better, once the Fed clarifies guidance that the taper is off the table for the foreseeable future.

Investors add longer-dated Treasuries after govt shutdown-survey
NEW YORK | Tue Oct 8, 2013 11:21am EDT

Oct 8 (Reuters) - Investors raised their holdings of longer-dated Treasuries in the latest week as the first U.S. government shutdown in 17 years entered a second week, feeding worries about another showdown over the debt ceiling, according to a survey released on Tuesday by J.P. Morgan Securities.

Failure to increase the $16.7 trillion borrowing limit before an Oct. 17 deadline, traders fear, would roil financial markets and could cause the government to delay payments on its debt obligations.

Wall Street stocks have fallen about 1 percent since the government reduced services and furloughed more than a half million workers. This stoked some safehaven bids for longer-dated bonds, although the move has been mitigated by concerns about a possible default that would damage the safehaven status of U.S. debt and the dollar.

There has been little progress between Democrats and Republicans toward an agreement to fund the government, although most analysts still expect the two parties to strike a last-minute pact to avoid a default.

The share of investors who said on Monday that their holdings of longer-dated U.S. government debt were greater than their holdings of portfolio benchmarks rose to 23 percent from 21 percent a week earlier, J.P. Morgan Securities said.

By holding more longer-dated Treasuries, investors increase the duration, or interest rate, risk to their portfolios in anticipation of a market rally, which generally causes longer-dated bonds to generate bigger gains than shorter-dated debt.

In J.P. Morgan’s survey of its Treasuries clients, 64 percent said they were “neutral” in their duration on U.S. government debt, or owned longer-dated Treasuries equal to their benchmarks, matching last week’s level.

Thirteen percent of its Treasuries clients said they were “short” in duration of Treasuries, or owning fewer longer-dated Treasuries than their benchmarks, down from 15 percent a week earlier.

The share of “longs” exceeded “shorts” in the latest week by 10 percentage points, which was the highest level of net longs since July 22. A week ago, the share of longs topped shorts by 6 points, J.P. Morgan said.

In early Tuesday trading, benchmark 10-year Treasury yields edged up 1 basis point to 2.639 percent.
…

“those left behind will ultimately drag everyone down, said deborah l. wince-smith, president and ceo of the council on competitiveness, a coalition of ceos, university presidents and labor union leaders. if we continue down this road ‘we will see more and more people that are not employed and they will be a huge drain on the economy in terms of entitlements,’ she said.”

The assumption is that entitlements are sacrosanct.

Permanent democrat super majority.

Who cares if it destroys what American citizenship stands for.

Power and Party before country.

Yeah, I was following that. Citizenship has been cheapened to the point it’s totally meaningless. Actually it looks more and more like a liability.

The US is dying or dead. These are maggots feeding on the flesh of decaying organism.

Here’s the interesting thing: The underpinnings of the US, the rule of law, citizenship, etc. are being or have been knocked out. Maggots like Jerry Brown are complete psychopaths who have no idea that these underpinnings support them. They’re kicking out the supports while standing on the deck.

There’s a special hell for Jerry Brown and his ilk. I will never forgive, I will never forget.

‘Gov Jerry Brown signed a bill to let illegals practice law’

Jacoby and Rodriguez

Only with the Trump name on them for quality…

But as long as the 0.1% got theirs, it’s all good bro

PBS Newshour - America’s children are the silent victims of the Great Recession:

“The Great Recession has disrupted the lives of families and their children in an unprecedented way.

It has changed everyday life in some ways that can be measured by money, but in others that cannot, and at the extreme, it has led to a six-fold increase in the risk children will be physically abused.

Lost jobs, falling incomes and foreclosures will likely compromise the capacity of children to become all that they can be, with the effects of the recession echoing not just across years, but also across generations.”

So, Mark Hanson is an ex-mortgage banker, who took up consulting in 2006, mid-bubble–and he got the bubble right.

“Hanson’s track record as a forecaster is mixed. He’s made numerous good calls, including predicting the 2007 housing crash. Where he says he went wrong in recent years was in 2012, when he turned from bull to bear, not realizing the extent of the private-equity and all-cash buying that he says is propping up the market.”

So as a forecaster for all of 7 years in a business that has long cycles, how many “good calls” is “numerous”?

I’ll have three

Did Mindy’s house get flooded a few weeks ago?

“I think it’s important for people in the world not to sympathize with alleged terrorists but to underscore the importance of the rule of law.”

Awww, lordy, I laughed so hard I’ve gotta put my shorts in the laundry.

If your goal is to see some good expertise, why don’t you post some?

‘The May and June “taper panic” gave a brief empirical peek at how markets might react to the end of the Fed’s monthly bond purchases — and at how statements by Bernanke may shape that response.’

‘The results aren’t pretty.’

“We have always been concerned there would be turbulence” when the world’s main central bank decides that the crisis is enough in the past that it can stop the extraordinary asset purchases and other efforts made to sustain the economy, said Karl Habermeier, assistant director of the IMF’s monetary and capital markets department. “What happened was not what we wanted or hoped for.”

You F’ed up, you trusted us

The other point is that as dramatic as this is, the types of situations that we see right now are really baked into the U.S. system of government. They are unfortunate and scary, but they in some sense follow by design. That’s something where models can really help clarify things.

I alluded to this in posts yesterday and today. By design… too bad most of the moonbats today are too ignorant of history, of our founders, and the insights they had, the challenges they faced in creating a government from scratch. The moonbats would rather bray like sheep: “But we have a mandate!”

Bugger off with your socialist “mandate”…

seems to me that the need for neogitiation was intended by the founders.

Liberace has entered the building!

“Debt is Slavery”

If debt is slavery why do the plebs take on so much of it?

See also:

http://en.wikipedia.org/wiki/Purple_drank

There’s a war for the minds of our children. Public schools are the front-line of that war…

As Sun Tzu teaches:
“Regard your soldiers as your children, and they will follow you into the deepest valleys.
Look on them as your own beloved sons, and they will stand by you even unto death!”

when i saw that the SUV guy was asian it became really difficult to determine who was at fault.

asian versus a latino…tuff call.

This is funny:

‘In one of Hanson’s latest blog posts he remarks that perhaps he is the only housing bear left. But as anyone familiar with financial history knows, it’s when there are no more bears left that the bear market begins.’

The “bear market” started a few months ago. Anyway, you don’t have a bear market after a bubble. Hey Bloomberg; it’s gonna fall a lot more than 20%.

It’ll always be a good time to buy the dip until it isn’t.

Here in Tucson, I’m seeing a ton of stuff for rent. Not so much for sale. What I do see isn’t exactly flying off the market.

They’ll be digging up bodies at Arlington Cemetery next.

I mentioned this summer that if it was a second bubble, it would last for years. If it was a dead-cat bounce in the same bubble, it would be much shorter.

The comments sections in all of the local sites have things like, “I have two these Blackstone houses in my neighborhood, and they’re both empty.”

In other late-breaking news, the sun is forecast to rise in the eastern sky on the morning of October 9, 2013.

a remarkable eight-year tenure

There certainly were a lot of remarks made about him on this site during that tenure…

“Both Yellen and Bernanke are scheduled to appear with Obama at the White House on Wednesday for a formal announcement.”

-1 Aw shucks. I was hoping for a gentile who vowed to imprison the oligarchs, and break-up the “too big to fail” investment banks.

Why is this BS for you? You want the US to sink in debt don’t you? This will give you solace when your Brazil Bubble goes down in flames, won’t it?

sheeeeeeeyit…. that road has been paid for 100x over. Incredulous…..

They probably have to furlough the people collecting those monies, their wages to be paid in full shortly for sitting at home. Will essential workers be there to threaten you if you try to peek at the Canyon?

Be more concerned about the children than your liability?

I’ll rethink my Tea Party support when Cruz goes on stage twerking…

Don’t you think every tea party Republican who was voted into office on a “repeal Obamacare” platform has a legitimate claim that their “mandate” from their voters (who they represent) is to fight to repeal Obamacare?

Yes, and said as much in many posts regarding the topic here.