Weekend Topic Suggestions
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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Is there any way to end ,or at least mitigate, the regulatory capture of the federal government? It’s totally understandable that when leaders of companies are appointed to high level cabinet posts, that they’ll try to advantage their friends, who will then advantage them. Time in DC is a time to make connections and build relationships, and is very brief. Geithner is a prime example, stating he wouldn’t go into industry, then promptly doing so. He’s a person just like you and me, he’s got bills to pay, mouths to feed. Leaving hundreds of millions of dollars on the table would be absurd.
• FCC: Tom Wheeler
• Cabinet: Jack Lew, Henry Paulson
• Fed: Stanley Fisher
• CFTC: Blythe Masters
• Federal Reserve Banks: Many industry leaders. <a href=”http://www.newyorkfed.org/aboutthefed/org_nydirectors.html”NY Fed as an example. Even Jamie Dimon was on the NY Fed board of directors.
“Starting with Robert Rubin – a former Citi CEO – three of the last four Treasury secretaries under Democratic presidents have had Citigroup affiliations before or after their Treasury service. (The fourth was offered, but declined, Citigroup’s CEO position.)” This sort of thing seems like it is tailor made to lead to, and reinforce, regulatory capture.
economy getting better ?
By Pras Subramanian
1 hour ago
Breakout
“Another decent, but not spectacular, jobs report out today with the economy adding 217,000 jobs in May, slightly below estimates of 220,000. The unemployment rate held steady at 6.3%. With the average growth in jobs in 2013 around 194,000 a month, the question whether the economy is doing better than expected is starting to sound like a yes.
Digging a little deeper beyond the headline number, not all is copacetic. Two important sectors to the economy, manufacturing and construction, added only 16,000 jobs last month. In addition, the labor-force participation rate (which measures the share of Americans older than 16 who are actively looking for work or who have a job) was unchanged at 62.8%, matching a 36-year low.
In the attached video, Jim Paulsen of Wells Capital Management says the positives are definitely outweighing the negatives when it comes to job growth in the U.S. “I think it’s steady as you go,” he says. “I think this is really good report… and there’s nothing in this report that’s going to change that anytime soon.”
As for those labor force participation rate that some might find worrying, Paulsen was quick to dismiss its importance, suggesting its decline is mostly due to aging demographics as baby boomers age and retire.”
There is a skills gap in America we have lots of pretty good to well educated dependable, non-drug users with no criminal record and we have lots of truck driving jobs.
Meanwhile in 2013, another 2 million Americans joined the ranks of the not working.
How long will it take for DOW to hit 20,000,000?
Got lizard brains?
Why one economist isn’t running with the bulls: Dow 5,000 remains closer than you think
BY Terry Burnham
May 21, 2014 at 12:00 PM EDT
Terry Burnham isn’t running with the bulls on Wall Street: he still predicts the Dow will hit 5,000 sooner than it will 20,000. Photo by Flickr user trygveberge.
Editor’s Note: Just over a week ago, the Dow closed at an all-time high of 16,715. Even Tuesday, when it declined, the Dow still closed at above 16,000.
But don’t get accustomed to that, warns Chapman University professor Terry Burnham. The former Harvard economics professor, author of “Mean Genes” and “Mean Markets and Lizard Brains,” Burnham argued on this page last summer that we would see Dow 5,000 before Dow 20,000. Ten months later, and a lot closer to an eventual end to the Federal Reserve’s stimulus program, the Dow has crept closer to 20,000. But Burnham’s sticking by his prediction, suggesting that U.S. macroeconomic policy is about to look a lot less fair to people who failed to recognize it as foul.
Our “lizard brains,” Burnham has often argued, blind us to the reality behind booming stock prices. Paul Solman interviewed Burnham about his lizard brain theory in 2005.
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Here is a little late-night confession: Based on FPSS’s recent suggestion that Mel Watt’s plan to “open the credit spigot” might be good for real estate prices, I parked about a third of my portfolio in REITs.
So far this part of my asset allocation has gone up like gangbusters. And to make it even better, I dumped a long term Treasury mutual fund to reallocate.
Some times in life your lucky guesses turn out to be correct!
It’s a good idea to dump your bonds before news like this hits the MSM.
Credit Markets
U.S. Government Bonds Pull Back, Post Weekly Losses
U.S. Jobs Growth and Coming Debt Sales Overshadow New Stimulus by ECB
By Min Zeng
Updated June 6, 2014 9:46 a.m. ET
Treasury (TWE.AU -0.20%) bonds ended a volatile session Friday on a slightly down note, as an upbeat U.S. jobs report and looming new debt sales overshadowed new stimulus from the European Central Bank.
In late afternoon trade, the benchmark 10-year note was 3/32 lower, yielding 2.597%, according to Tradeweb. When bond yields rise, their prices fall.
The bond market posted a weekly price loss with the 10-year yield rising by 0.138 percentage point, the biggest weekly increase in the yield since September.
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So long as the Toxic Twins are back, why not get on board the money truck and take your fair share of the free bread?
Fannie Mae and Freddie Mac
Return of the toxic twins
Mel Watt wants easier credit for homebuyers. What could go wrong?
May 17th 2014 | WASHINGTON, DC | From the print edition
THEIR reckless investments helped inflate the housing bubble. Their collapse in 2008 triggered a government takeover and a costly bail-out. Many people would like to see Fannie Mae and Freddie Mac, America’s twin mortgage giants, abolished. But their new regulator wants the two firms, which guarantee 55% of new American mortgages, to promote easier credit—again.
Mel Watt, a Democratic ex-congressman, took over as boss of the Federal Housing Finance Agency (FHFA) this year. He replaced Ed DeMarco, who had focused on shrinking the twins and recovering the bail-out cash. On May 13th Mr Watt signalled a break with all that.
The maximum size of a Fannie or Freddie-backed loan, rather than shrink, will stay the same: $417,000 in most areas, and $625,250 where housing is pricey. The fees the twins charge to guarantee loans, rather than rise, will for now stay the same. Most important, Mr Watt clarified and narrowed the conditions under which banks which sold Fannie and Freddie dodgy mortgages would be forced to buy them back. Mr DeMarco had relentlessly pursued such “putbacks”, scaring banks into denying credit to all but the best qualified borrowers. “I don’t think it’s FHFA’s role to contract the footprint of Fannie and Freddie,” Mr Watt said. Together, these steps offer a modest fillip to home sales and construction.
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CLNY is up 12% since I purchased it and the dividend is 7%. I got lucky too.
When will policy makers learn/admit that attempts to make goods and services more affordable by government subsidies or buying them for people, just makes them more expensive?
“…buying them for people, just makes them more expensive?”
For whom?