Bits Bucket for October 20, 2014
Post off-topic ideas, links, and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
About Me
Name:Ben Jones
Location:Northern Arizona, United States
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Meet the losers of the Wall Street-Federal Reserve looting syndicate’s swindles: the productive middle and working classes.
http://wolfstreet.com/2014/10/18/these-charts-show-the-pauperization-of-workers-in-the-uk-and-america/
Since the financial crisis, the government of the UK and the Bank of England have jumped through hoops and twirled around in extraordinary gyrations to bail out one of the largest financial centers in the world, the uniquely powerful and at once unaccountable speck of land, the City of London, an incorporated area within London known as the Square Mile; or rather bail out its financial institutions, its way of doing business, and its bonuses; and along the way, bail out banks further afield.
Greedy, short-sighted CEOs (is there any other kind in today’s crony-capitalist economy?) using stock buybacks to artificially boost both P/E and their own compensation - paid for, of course by debt issuance - what could possibly go wrong?
http://www.zerohedge.com/news/2014-10-20/blood-red-big-blue-why-ibm-crashing-charts
“… using stock buybacks to artificially boost both P/E and their own compensation …”
“Never underestimate the power of incentives.” - Charlie Munger
If you don’t want them to trash the company in order to line their pockets then don’t give them the incentive to do so.
I read that the recent bull run on Wall Street was heavily driven by investors buying stock on margin. Didn’t similar behavior precede Wall Street’s Great Crash of 1929, when margin calls led to a cascading series of defaults to depression?
Financial Times
October 19, 2014 8:13 pm
Heavy borrowing to buy equities adds investors’ anxieties to skittish market
Michael Mackenzie and Vivianne Rodrigues in New York
Investors borrowed a record amount of money to buy US equities during the bull run, a risky strategy now casting a shadow over the S&P 500 amid market turbulence.
An upsurge in market volatility as US stocks dropped 6.2 per cent from last month’s record peak has put the spotlight on those investors that borrowed money – known as margin trading – to help boost returns.
Peaks in margin trading have been a precursor to bear runs in the past, notably in March 2000 and July 2007.
Recent wild swings in asset prices have been blamed already in part on brokers cutting margins for those investors whose investments were approaching losses. Forced sales by those investors helped fuel the market rout.
…
I suspect your question is rhetorical, but in case it isn’t I’ll refer you to the author of “The Great Crash” and his take on economics, politics and bubbles.
Galbraith was of the opinion that the Great Crash had burned itself so deeply into the national consciousness that America had been spared another bubble up to the present time (1954);however he thought the chances of another speculative orgy which characterized the 1929 crash as rather good as he felt the American people remained susceptible to the conviction that unlimited rewards were to be had and that they individually were meant to share in it. He considered the sense of responsibility in the financial community for the wider community as whole as not being small but “nearly nil”. Even though government powers were available to prevent a recurrence of a bubble their use was not attractive or politically expedient since an election is in the offing even on the day after an election.
The only thing I’d change with that comment is delete American and it sums up humanity rather well.
Is Big Blue really driving the earnings bus again? Seems so 1980…
Market Snapshot
U.S. stocks: Futures fall as IBM slides
Published: Oct 20, 2014 7:33 a.m. ET
By Barbara Kollmeyer
Markets reporter
MADRID (MarketWatch) — U.S. stock futures fell into the red on Monday, as Dow industrials heavyweight IBM dropped sharply in premarket trading on downbeat results.
European stocks fell after major software maker SAP cut its earnings outlook.
Swinging from a thin lead to a loss, futures for the S&P 500 index (SPZ4, -0.26%) fell 5.6 points, or 0.3%, to 1,875140, while those for the Dow Jones Industrial Average (DJZ4, -0.52%) slid 81 points, or 0.5%, to 16,353. Futures for the Nasdaq-100 index (NDZ4, -0.03%) was wavering between losses and gains in premarket trading.
…
Have we entered a period like Summer of 1980 when the stock market seemed to crash a couple of times a week for months on end?
I really meant to write Summer of 2000, though I suspect 1980 was similar. Back to sleep now!
The Dotcoms mainstreamed lies and scams in place of fundamentals. It is now just business as usual to have a business based on tricking others whether flipping houses, click bait ads, free trial offers that can never be cancelled, hidden banking fees, or trees that will grow to the sky.
Fed’s Fisher backs ending QE3 on schedule next week.
So long as investors keep buying the dip, we needn’t worry about a Black Monday rerun.
Need to Know
Markets not looking to repeat Black Monday, even after the new Barron’s cover
Published: Oct 20, 2014 7:41 a.m. ET
Critical intelligence before the U.S. market opens
By Shawn Langlois
Markets reporter
Remember what you were doing 27 years and one day ago?
I was a late-blooming 17-year-old who just started his senior year in high school. In my pubescent glory, I had no idea of what was happening on Wall Street. But those of you with a few years on me probably remember it well. If my gramps were alive today, I’d be hearing the whole story. Again.
Of course, it was Black Monday. Destroyer of markets. Creator of ulcers. Wrecker of careers, crusher of dreams, and threat to the world as we knew it. Stocks plunged 22% in their worst showing of all time and doomsday scenarios were almost realized. “It was an incredibly time and the financial system was within hours (and a few phone calls) of an absolute collapse. It was a time I’ll never forget,” wrote Art Cashin of UBS in a great color piece on CNBC over the weekend.
David Rosenberg won’t forget it either, and he offered up an even bleaker assessment in a recent conversation with Barry Ritholtz. He said people actually thought the world was ending.
“I’ve been through the savings and loan crisis. I’ve been through what happened in 1994, the tech wreck,” he said. “I was there on Wall Street between New Century Financial, and Bear Stearns, and Lehman, and AIG, but I’ll tell you something: the palpable fear, there was nothing like October 19, 1987.”
It’s the specter of those kinds of days that has investors on edge when the market starts going haywire like it has in recent sessions. Every whiff of a triple-digit drops feels dangerously close to turning in to something a lot more harmful. But it’s just not happening. The rebounds are still there. Friday was just the latest example of the safety net investors keep providing.
…
In perspective, I had not one dime in the stock market in 1987. Didn’t start working until 1985 and was learning about rip offs that some developer did to a bunch of fellow engineers. I was happy not to trust my money to flim flam.
“End of the world?” That blew by me. I was just a young and struggling engineer addicted to rock music.
To make matters worse, my klunker of a car gave out and I bought a new car. 5 years of payments seemed forever back in those days. 11% interest.
I had money in the market but I didn’t know until months later when broker told me I did fine! I’m all, “what’s margin”
Never did margin since!
Financial Times
Last updated: October 17, 2014 6:36 pm
Wild price swings are flashback to crisis
Ralph Atkins and Christopher Thompson in London and Michael MacKenzie in New York
For veterans of global financial crises, early Wednesday in New York was a frightening flashback. In a matter of minutes, yields on US Treasuries, which move inversely with prices, dived precipitously. Such dramatic moves are extremely rare; it was as if mounting tensions in global markets had suddenly found expression. “It felt things could really crack. We haven’t seen that for a long time,” says Isaac Chang, global head of fixed income at KCG.
The “flash crash” in US Treasury yields was the tensest moment in the most turbulent week in markets since the eurozone crisis. Global equity and bond prices swung sharply, oil prices tumbled, and “spreads” widened between government borrowing costs in the weakest eurozone countries and in Germany.
By the end of the week, relative calm had returned – helped by hints from US Federal Reserve and Bank of England officials that central bankers could delay any monetary policy tightening. Market sentiment, however, has shifted decisively, with investors fearing markets have mispriced global economic prospects, and that the financial system remains prone to malfunction.
“We were definitely in dangerous territory – equities were high, ‘spreads’ were tight – but what happened [on Wednesday] was something exceptional,” says Erik Nielsen, chief economist at UniCredit. “I have never seen a move back and forth in such a short space of time.”
The backdrop to the stress was an increasingly violent clash of views between global equity and bond investors. For much of this year, equities had rallied on hopes of a world economic recovery, with the Fed “normalising” US monetary policy next year. But falling yields on “safe” US, UK and German government bonds told a different story – of sluggish growth, exceptionally low inflation and central bankers trapped at low interest rates for longer.
This week, it was the bond gloomsters who were vindicated. Markets, in effect, were dealt a “growth shock” as investors reeled from a toxic combination of economic forecast downgrades by the International Monetary Fund in Washington last week, concern about China, falling inflation rates, a stalling German economy and worries in the US about the impact of a stronger dollar.
Exacerbating the turmoil were investors caught short by the sudden turn in sentiment. A crucial tipping point on Wednesday was when 10-year US Treasury yields fell below 2 per cent. The breach caused many who had bet on rising yields to finally capitulate – sending yields even lower. Banks blamed regulators for reducing market liquidity and intensifying the scramble. Instead, investors traded in futures markets: CME Group reported daily volumes in derivatives trading hit 39.6m contracts – the highest in its 166-year history.
…
crater
Denver 42 San Francisco 17
Peyton 510 career TD passes
Crater = your team
50+ games faster than Farve (yeah, yeah) did it, too.
giAnts crater.
By the end of this season, I will have Papa John’s garlic butter dipping sauce oozing from my eyes, ears, nostrils, skin pores, projectile vomiting and uncontrollable explosive diarrhea, and my 325 pound body will be found days after the Souper Bowl with dogs chewing on my face and surrounded by empty pizza boxes.
Other QB’s have better records because of better coaching or better defense or what have you, but from the pov of pure theory of the game, Peyton really owns that position.
Johnny U was still the best that’s ever been
Take On Tech
Bad landlord? There’s an app for that
Published: Oct 20, 2014 5:11 a.m. ET
By MarketWatch
Renters can use new apps to keep landlords in line. Charlie Turner reports.
0:02:21
There used to be a “Rotten Neighbors” website. I was crushed when they took it down.
The Wall Street Journal
ECB starts buying covered bonds as part of stimulus plan
Published: Oct 20, 2014 9:10 a.m. ET
By Ben Edwards
Brian Blackstone
The European Central Bank said Monday it had started buying covered bonds as part of a stimulus program to boost the eurozone’s flagging economy.
One person familiar with the matter said the ECB had been buying short-dated covered bonds from a number of different countries, in sizes up to €25 million ($32 million).
Covered bonds are backed by a pool of loans such as residential mortgages, and are widely considered as the safest type of debt that banks sell.
The ECB’s covered bond program is part of a package of stimulus measures announced in September that included interest rate cuts to fresh record lows and planned purchases of asset-backed securities.
The ECB doesn’t have a target amount for the purchases. It is unclear how much in total it has bought, or sought to buy, Monday. The ECB will announce its weekly purchase amounts each Monday, starting next week.
…
Are you missing out on the fantastic rally in Treasury bonds?
Bond Report
Treasurys rise in wake of whirlwind week
Published: Oct 20, 2014 9:42 a.m. ET
Opposing macroeconomic forces result in tug of war on yields
By Ben Eisen
Reporter
Bloomberg
Richard Fisher: farewell QE3.
NEW YORK (MarketWatch) — Treasury prices inched higher Monday as stocks fell, a sign that investors are still skittish after last week’s whirlwind.
The 10-year Treasury note (10_YEAR, -1.09%) yield, which falls as prices rise, was down 3 basis points on the day at 2.169%. Stocks pointed lower.
Market participants are recovering from a surge in prices last Wednesday, which briefly pushed the benchmark yield below 2% for the first time since June 2013. Yields reversed higher to close out the week, but the trading action revived questions about the competing forces at play in the bond market.
While the U.S. economy continues to improve, which usually pushes yields higher, slowing global growth threatens to hamper the recovery by spreading deflation, possibly continuing to push yields lower. The Federal Reserve’s timeframe for raising key lending rates hinges upon its view of the economic recovery.
“We all have our biases but for now we think it is best to think about the markets trading between the two extremes based on policy-maker actions and data,” said Dominic Konstam, analyst at Deutsche Bank, in a research note on Friday.
…
Suppose there was an epic earthquake in the financial markets, and almost nobody even noticed?
Legal/Regulatory | Markets
Seeking a Cause After 10-Year Treasury Bond’s Unnerving Move
By Peter Eavis
October 19, 2014 1:00 pm
The Federal Reserve Bank in Lower Manhattan. The Treasury market was shaken last week.
Credit Michael Appleton for The New York Times
During the turmoil in global markets on Wednesday, something happened that bond traders will not soon forget.
Soon after 9 a.m., the yield on one of the world’s most-traded bonds, the 10-year Treasury, went into a bizarre free fall. This particular Treasury note is tracked obsessively by Wall Street and is a reference for other interest rates across the wider economy. Investors see it as a haven in times of stress.
On Wednesday morning, stock markets in Europe were sliding, and fears about the strength of the global economy were building. After the Treasury market opened, the yield on the 10-year Treasury, which moves in the opposite direction of its price, plunged far below the 2.2 percent that it had closed at the day before. By 9:36 a.m. on Wednesday, it hit 1.9 percent. Then it snapped right back, and within 15 minutes, was again trading above 2 percent.
Such changes may seem small compared with other securities, but for the Treasury market, which usually moves incrementally, they were huge. The drop in the yield was similar to the move that occurred when Lehman Brothers collapsed.
The white-knuckle move by the 10-year Treasury continues to stun traders and investors. “If you are steeped in bond market lore, you will be telling your grandchildren about this move,” James A. Bianco, president of Bianco Research, said.
…
Treasury Bond Prices Rises; Goldman Abandons 3% Yield Forecast
By Dow Jones Business News, October 20, 2014, 03:48:00 PM EDT
By Min Zeng
Treasury bonds strengthened Monday for the first time in three sessions as uncertainty over the global economic outlook boosted demand for safe-haven assets.
The benchmark 10-year note was 5/32 higher, yielding 2.180%. The yield was 3% at the start of the year. Yields fall as prices rise.
Traders said Monday that the buying reflects continued worries over the uneven pace of global growth, which last week sparked sharp price swings in stocks and Treasury bonds. Persistent geopolitical risks–including the standoff between Russia and Ukraine and the Ebola virus–also clouded the growth outlook.
There is an “increasing level of global economic and political uncertainties” and riskier assets “remain too expensive,” which supports lower yields, said Guy Haselmann, head of U.S. interest-rate strategy at Bank of Nova Scotia in New York.
Over the past two weeks, focus has been on the eurozone, which is struggling with an anemic pace of economic recovery and alarmingly low inflation. Economists and investors are concerned that low inflation could turn into deflation–a damaging cycle of falling prices and reduced spending, a risk that could have a broader impact on global financial markets and economic growth.
Goldman Sachs Group Inc. and J.P. Morgan Chase & Co. cut their year-end interest-rate forecasts at the end of last week, becoming the latest Wall Street firms to bow to the reality of falling bond yields among dimming global-growth projections.
Interest-rate strategists at Goldman Sachs said they expect the 10-year U.S. Treasury note’s yield to end this year at 2.5%, down from an earlier estimate of 3%. J.P. Morgan said it expects the 10-year note’s yield to end this year at 2.45%, down from an earlier 2.7% estimate.
The revision underscores how a year-long price rally in ultrasafe Treasury bonds has wrong-footed many investors and strategists who expected bond yields to rise this year.
Investors and traders who had bet on higher bond yields, known as a short wager on bonds, scrambled to close their positions last week. The 10-year note’s yield at one point last week touched 1.87%, the lowest level since May 2013.
“Many bond bears were stopped out last week,” said Jason Rogan, managing director of U.S. government bond trading in New York at Guggenheim Securities LLC. “Volatility is going to stay high given the uncertainty.”
…
Why would anyone buy risky bonds when you can park 100% of your savings in nice, safe, high-return stocks?
Retirement Investing
Why I Won’t Own Bond Funds in My Retirement Portfolio
Ruth Davis Konigsberg
1:54 PM ET
Trays of eggs James Jackson—Alamy
Owning a mix of stocks and bonds is supposed to help protect your portfolio from losses. But bonds aren’t the safe asset they once were.
When stocks took a tumble last week, financial pundits were quick to call it a “potent reminder” to investors of the importance of having some bonds in your portfolio for their perceived safety and yield. The classic mix is supposed to contain 60% stocks and 40% bonds, with bonds supposedly cushioning the risk of equities. In the eyes of most investment experts, I would be considered foolish to be 100% in stocks, as I have been ever since I started investing.
But I’m not sure what bonds they’re talking about. Yes, last week the yield on a 10-year U.S. Treasury note surprised everyone by falling sharply to 1.85%, as bond prices soared—when bond prices rise, bond yields fall, and vice versa. Treasury yields edged back up to 2% the next day, as stocks rebounded. Wall Street experts are still trying to determine the reasons behind the 10-year Treasury note’s plunge, which stunned investors and traders.
But that was a one-day event. When you look at the decline in bond yields over the last three decades, I don’t understand how it is mathematically possible for Treasuries—known as the safest bond possible—to protect a stock portfolio against major shocks over the next 20 years.
…
Gotta wonder how Konigsberg would feel if the fed hadn’t rescued the stock market and just let investor’s absorb the downside risk they signed on for when they entered the markets?
We toured an open house last week in out DC Exurb. Poorly maintained except for the deck, which was nice. Outdated cabinets, counters, fixtures…..you name it. Pretty much looks all original from the 1970s when they built it. When speaking to the Realtor he mentioned something that shocked me: “This is the lowest priced house in this town”
It was listed at $399K. I asked him if he really thought it was going to sell anywhere near that, he basically said “No.” And told me he has tried to talk the owners down to get it sold, but their classic Boomer response was the canned “Well, I’m not gonna GIVE it away”!
It’s funny, there millions of 1970’s renovations, a few 1980’s renovations, lots of 2003-2008 pergraniteel renovations, and some new flipper renovations now. I guess nobody renovated in the 1990’s?
I think that the concern about living in “updated” houses was much less pronounced in the ’90s than it is today. Plenty of Americans probably bought houses with interiors that hadn’t changed in 10 or 20 years without even noticing it much. It’s possible that that attitude will return after the next crash in house prices. Americans will realize that very few people can afford to be concerned with the notion that different kinds of countertops or doorknob become stylish every few years.
In coming years granite and stainless steel will cause prospective buyers to run screaming into the streets in horror.
The Mark of the Bubble it will be.
Granite counter tops are radioactive.
What’s Lurking in Your Countertop?
By KATE MURPHY
Published: July 24, 2008
SHORTLY before Lynn Sugarman of Teaneck, N.J., bought her summer home in Lake George, N.Y., two years ago, a routine inspection revealed it had elevated levels of radon, a radioactive gas that can cause lung cancer. So she called a radon measurement and mitigation technician to find the source.
“He went from room to room,” said Dr. Sugarman, a pediatrician. But he stopped in his tracks in the kitchen, which had richly grained cream, brown and burgundy granite countertops. His Geiger counter indicated that the granite was emitting radiation at levels 10 times higher than those he had measured elsewhere in the house.
“My first thought was, my pregnant daughter was coming for the weekend,” Dr. Sugarman said. When the technician told her to keep her daughter several feet from the countertops just to be safe, she said, “I had them ripped out that very day,” and sent to the state Department of Health for analysis. The granite, it turned out, contained high levels of uranium, which is not only radioactive but releases radon gas as it decays. “The health risk to me and my family was probably small,” Dr. Sugarman said, “but I felt it was an unnecessary risk.”
…
“I asked him if he really thought it was going to sell anywhere near that, he basically said “No.” ”
Of course it won’t. Not when you can build it brand new for half that amount.
Czars gone wild: A short history of ‘czars’ in White House administrations
Published: Oct 17, 2014 4:38 p.m. ET
By Trey Williams
Reporter
Getty Images
These guys warranted a White House czar
WASHINGTON (MarketWatch) — President Barack Obama on Friday named Democratic aide Ron Klain the administration’s official Ebola czar. Ebola is a big concern right now, so it makes sense to appoint someone charged with coordinating the response to the disease as well as have someone to use as a punching bag in case things continue to go south.
A little confused? Essentially a czar is an unofficial title given to an official advisor to the White House. Appointed by the president, that czar doesn’t necessarily have to be confirmed by the Senate (though some have been), which allows the White House to put who they need, where they need them, advising on the issues where they need advice.
There are, and have been, a lot of issues that may have needed such a person, so MarketWatch decided to take a look at some of the “czars” Obama, and presidents before him, have given much power and much responsibility.
Some unique czars:
Reid Lyon, “reading czar” under President George W. Bush
Bill Jeffers, “rubber czar” under President Franklin Roosevelt
Byron Price, “czar of censorship” under President Franklin Roosevelt
Alfred Kahn, “inflation czar” under President Jimmy Carter
Carlton Turner, “drug czar” under President Ronald Reagan
Newbold Morris, “cleanup czar” under President Harry Truman
Trevor Gardner, “missile czar” under President Dwight D. Eisenhower
John Dilulio, “faith-based czar” under President George W. Bush
Ashton Carter, “weapons czar” under President Barack Obama
Here’s an exciting one — the White House has an Asian carp czar. Back in 2010 Obama appointed John Goss as Asian Carp director for the White House Council on Environmental Quality.
…
I think we need an Asian Crap czar.
How about “faith-based” crap Czar?
Or maybe congress can appoint an idiot czar to manage obama.
“How about “faith-based” crap Czar?”
Will that include the Islamist faith?
I think the Mayor of Houston would be Obama’s first pick for your czar.
#FundamentalTransformationOfAmerica
we need a rap/ hip hop czar to perpetrate racism in America… is jayz available or dr.luke but we must have al sharpton on the community consulting board at $250k a year,
This is an article linked from the Drudge Report (the Drudge Report are not real journalists) from Breitbart dot com (Breitbart dot com are not real journalists), the real journalists at the New York Times and the real journalists at the Washington Post have not reported on this, although it is public knowledge, with a link to the solicitation on the fbo dot gov website:
“a draft solicitation for bids issued by U.S. Citizenship and Immigration Services (USCIS) Oct. 6 says potential vendors must be capable of handling a “surge” scenario of 9 million id cards in one year “to support possible future immigration reform initiative requirements.”
The request for proposals says the agency will need a minimum of four million cards per year. In the “surge,” scenario in 2016, the agency would need an additional five million cards — more than double the baseline amount for a total of 9 million.
“The guaranteed minimum for each ordering period is 4,000,000 cards. The estimated maximum for the entire contract is 34,000,000 cards,” the document says.
http://www.breitbart.com/Big-Government/2014/10/19/Exclusive-Obama-Admin-Quietly-Prepares-Surge-Of-Millions-Of-Immigrant-IDs
Why not just let the Mexican consulates handle it? Isn’t a Matricula Consular card a defacto immigrant id?
Obama = Sociopathic / psychopathic LIAR!!!
tell us how you really feel about president obama
on a related topic, today is the first day to drop off ballots mailed to colorado voters, am considering breaking from voting a straight libertarian ticket (and leaving the rest of the ballot blank in all races where there are only republican or democrat candidates) and voting for republican governor candidate bob beauprez. i disagree with many of his policies but think he could be the last chance to veto gun laws passed by the democrat legislature voted into office by east and west coast carpetbagger liberals who want to turn this state into california.
he could be the last chance to veto gun laws passed by the democrat legislature voted into office by east and west coast carpetbagger liberals who want to turn this state into california.
We have some of that going on in Washington as well. My city council voted to pass a motion in favor of the state initiative (what’s the point). Man was that an interesting city council meeting, to be sure. There are a lot of scared, scared people out there “every time I hear a siren I think ‘did something happen to my kid’ “.
“…voting for republican governor candidate bob beauprez.”
What’s his position on MJ?
Do you ever see anything on Drudge or Brietbart that discusses the business owners who illegally hire the illegal aliens?
Do you ever see Warren Buffet decide to pay his secretary more money or pay more in taxes, or do you just hear him bloviate about it?
Thanks for injecting some irrelevance.
Richard Bove, an analyst at Rafferty Capital Markets LLC, in a phone interview:
“If interest rates are low, it means a large portion of the population was made poor because passive income declined.”
“If you take a look at the economy, I think that the economy has grown in line with the growth in population and the growth in income. I would argue that the bulk of this QE money never reached the economy.”
“Someone’s got to prove to me that inflation did not increase in the areas where the Fed put the money. We know where they put the money. And we know where they put the money prices went up dramatically. And we also know the consumer price index does not pick up either of those price increases. Housing prices are not in the CPI and fixed income prices are not in the CPI. So how do you know that QE benefited the economy?”
”State ‘Income Migration’ Claims Are Deeply Flawed”
Differences in income taxe ratess across states have little impact on migration:
State “Income Migration” Claims Are Deeply Flawed, by Michael Mazerov, CBPP: Some proponents of state income tax cuts are making highly inaccurate claims about the impact of interstate migration patterns on states with relatively high income taxes based on a misleading reading of Internal Revenue Service data.
Those making these arguments claim that many of the people who leave states with relatively robust income taxes do so largely in order to pay little or no income tax in another state, and that they take their incomes with them when they move, harming the economies of the states they left. As a consequence, these “income migration” proponents claim, states with relatively high income taxes are suffering severe damage from the loss of income as “money walks” out of their states to lower-tax states.[1]
The first part of this argument — that interstate differences in tax levels are a major explanation for interstate migration patterns — is not supported by the evidence, as we documented in an earlier paper.[2] People rarely move to lower their state income taxes. Other factors, such as job opportunities, family considerations, climate, and housing costs, are much more decisive.
The second part of the argument — that states with relatively high income taxes are suffering severe economic damage because they are losing the incomes of people who migrate to other states — is also deeply flawed. …
My response herewith to the article previously posted:
rj chicago said…
“Other factors, such as job opportunities, family considerations, climate, and housing costs, are much more decisive”
In ILLANNOY this is the fact - one person net leaves the state for better opportunities - period - net out migration and they are taking their money and businesses with them.
The sop put forth in this article does not hold factual water at all. Look at the stats here in ILLANNOY and it is fairly simple to see the downward spiral occurring here. House prices and foreclosures tied to the second highest property taxes in the entire US. Failed policy in re to pensions - the failure of this has led to over 100 billion (with a B) dollars in unfunded future entitlements and 6 billion in current unpaid vendor billings from the state comptroller.
So….don’t for a moment believe the story outlined in this article. Failure in policy is leading to a significant out migration from ILLANNOY leading to more policy fail. And the response from the state house here - Raise taxes. That is the only solution they have.
As the scripture says
as for me and my house - we are leaving!!!
Reply Monday, October 20, 2014 at 12:43 PM
rj chicago said…
Sorry for the lack of clarity - It is one person net EVERY TEN MINUTES in ILLANNOY leaving the state.
Reply Monday, October 20, 2014 at 12:44 PM
Region IV
Region VIII
May the odds be ever in your favor.
Federal Housing Finance Agency Unveils Plan to Loosen Mortgage Rules
By DIONNE SEARCEY and PETER EAVISOCT. 20, 2014
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A federal housing regulator on Monday announced a plan that could ease tight credit and allow more people to qualify for mortgages in an attempt to put the nation’s housing market back on track.
The plan, announced at a convention of mortgage bankers, includes offering reassurances to lenders that fear they could suffer unpredictable losses on the loans they sell to the government.
Separately, plans are in motion to set up programs for borrowers to receive government-backed loans with much smaller down payments than are now required.
“We know that access to credit remains tight for many borrowers, and we are also working to address this issue in a responsible and thoughtful manner,” said Melvin L. Watt, director of the Federal Housing Finance Agency, which regulates the mortgage finance giants Fannie Mae and Freddie Mac.
The move in large part is intended to reassure banks that have had to pay tens of billions of dollars to settle legal cases in the wake of the housing crisis and buy back bad loans sold to Fannie and Freddie. To avoid having to make those payments again, many lenders now demand that borrowers meet stricter requirements for loans, known in the industry as overlays.
“We know that this issue has contributed to lenders’ imposing credit overlays that drive up the cost of lending and also restrict lending to borrowers with less than perfect credit scores or with less conventional financial situations,” Mr. Watt said in a speech to the Mortgage Bankers Association convention in Las Vegas.
Some economists, along with mortgage bankers, welcomed the new plan, saying that it, along with more gains in the job market and newly lower mortgage rates, could put the housing recovery back on track.
“On the whole, this is very good news for the housing market and the economy,” said Mark Zandi, chief economist at Moody’s Analytics. “Creditworthy borrowers who have been locked out of the housing market will finally have an opportunity to become homeowners.”
Some housing experts have been skeptical of giving concessions to mortgage banks, which they contend could again leave taxpayers vulnerable to losses from bad loans made by the nation’s largest banks. Amir Sufi, professor of finance at the Booth School of Business at the University of Chicago, cautioned in recent testimony before Congress that looser credit that is not based on higher income growth could lead to economic peril.
Some economists and policy makers have blamed a dearth of mortgages for holding back the economy from a complete recovery. As evidence, they point to sales of single-family homes, which have progressed more slowly than expected.
Recently, Ben S. Bernanke, the former chairman of the Federal Reserve, told an audience that even he could not get a loan to refinance his mortgage.
With the new plan, the government is trying to strike a balance between the frenzied days before the recession, where mortgages were handed out too liberally, and the tight grip on mortgages that followed.
Continue reading the main story
Continue reading the main story
“It requires a lot of fine-tuning to get a national mortgage market that achieves all the objectives we want,” said Stan Humphries, chief economist for Zillow, a real estate website.
To reassure mortgage lenders, the housing finance agency intends to further relax the agreements that determine when Fannie and Freddie can require banks to buy back bad loans. The terms that are being loosened have to do with cases in which loans show evidence of fraud or other flaws during the underwriting process.
Under the new agreements, for instance, Fannie and Freddie would demand buybacks only when there was a pattern of misrepresentations and inaccuracies in the loans. In addition, if problems are later discovered in loans, the deficiencies would have to be significant enough to have made the loans ineligible for purchase by Fannie and Freddie in the first place.
These changes follow other adjustments that the housing finance agency has recently made to calm the mortgage banks. Last year, the agency decided that except in the case of fraud and other missteps, the banks would not have to buy back loans if borrowers had stayed mostly current for three years. Though that is a substantial step on paper, banks have not increased their lending to less-creditworthy borrowers.
“It had virtually no impact,” Guy Cecala, publisher of Inside Mortgage Finance, an industry publication.
Mr. Watt did not offer specifics about plans to require smaller down payments from borrowers other than to say that they would be aimed at those who are creditworthy by taking into account “compensating factors” and could include down payments of as little as 3 percent. He said more details would be offered in coming weeks.
http://www.nytimes.com/2014/10/21/business/economy/federal-housing-finance-agency-unveils-plan-to-loosen-mortgage-rules.html
“Separately, plans are in motion to set up programs for borrowers to receive government-backed loans with much smaller down payments than are now required.”
Does this imply that all American taxpayers consent to cover the cost of guaranteeing these new low-downpayment loans to people with dodgy credit histories?
“Does this imply that all American taxpayers consent to cover the cost of guaranteeing these new low-downpayment loans to people with dodgy credit histories?”
Liberty, 21st century style.
Looks like the thrill is gone for some of the Obama Zombies.
http://www.dailymail.co.uk/news/article-2799603/crowds-walk-obama-speech-rare-campaign-trail-appearance.html
https://westernrifleshooters.files.wordpress.com/2014/10/screen-shot-2014-10-19-at-10-32-10-pm.png
http://news.investors.com/ibd-editorials/102014-722665-mel-watt-officially-loosens-fannie-freddie-mortgage-standards.htm
Subprime Redux: Mel Watt’s easy credit crusade is now off and running. Fannie Mae and Freddie Mac’s chief regulator has officially lowered lending standards for the entire mortgage industry. Here we go again.
In January, we warned that Watt’s swearing-in as head of the Federal Housing Finance Agency would mark the start of the next housing bubble. We pointed out that the Congressional Black Caucus’ former head has a soft spot for those who can’t afford homes and that as a Democrat lawmaker he pressed Freddie to lend even to “welfare recipients” in his district.
“Expect him to reboot the era of easy credit,” we warned. “Watch him use his control of Freddie and Fannie to return to the recklessly lax policies that caused the mortgage crisis.”
Now comes news that he and the nationalized mortgage giants have drawn up new rules aimed at loosening underwriting standards to make home loans more affordable and easier to get for low-income borrowers with poor credit.
Read More At Investor’s Business Daily: http://news.investors.com/ibd-editorials/102014-722665-mel-watt-officially-loosens-fannie-freddie-mortgage-standards.htm#ixzz3GjrQqhc3
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It’s hard to believe the GSE-supported Housing Bubble is about to reflate even more than it already has!
Why not just lower housing prices in California and manhattan?
In the meantime prices continue to crater.
Are you prepared to enjoy more stock market losses tomorrow?
Market Pulse
U.S. stock-index futures point to early Tuesday losses
Published: Oct 21, 2014 1:02 a.m. ET
By Michael Kitchen
Asia editor
LOS ANGELES (MarketWatch) — U.S. stock-index futures suggested losses at the Tuesday open, with the weakness coinciding with a pullback in much of Asia. About 8-1/2 hours ahead of the stock market open in New York, futures for the Dow Jones Industrial Average (DJIA, +0.12%) and S&P 500 (SPX, +0.91%) implied a 0.3% loss for each, while Nasdaq 100 futures pointed to a 0.2% drop. Most major markets in Asia retreated Tuesday, with Hong Kong’s Hang Seng Index (HSI, -0.23%) down 0.3% at the midday break, and Japan’s Nikkei Average (NIK, -1.97%) dropping 2% in afternoon trade following a 4% rally the previous day. Helping drive the fall in Asia were a mixed bag of Chinese economic data, including the slowest GDP growth in five years, and a drop in housing prices, but a better-than-expected gain for September industrial production.
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