Monday, September 24, 2012

Today's links

 1--A durable recovery would be demand driven not supported by restricted supply, oc housing news

The current low-level mini-bubble in home prices is due to speculators ferociously outbidding one another to snatch up properties, prompting real estate owned (REO) and short sale sellers and lenders to sense increased action then demands higher prices as a result. …
As a result, speculators and lenders have artificially driven volume and prices up a bit, though only temporarily. In the process, they have created the illusion of increased demand where very little actually exists....

The truth is in the numbers: there were roughly half as many buyer-occupants as sellers in the second quarter of 2012, the speculators merely taking the seller’s risk position of locating that buyer-occupant (or interim tenant for lack of an immediate flip).
However, speculators will soon realize their investments aren’t paying off as expected. At some point in the second half of 2012, this mini-bubble will deflate and we’ll be back to square one, a point which may have already passed. Stay tuned for Q4 2012.

2--What the Fed Move Means, WSJ

The Fed says it plans each month to buy $40 billion of agency mortgage-backed securities, which are supported by government-sponsored enterprises such as Fannie Mae and Freddie Mac FMCC +1.92% . The Fed says the buying will continue until the labor market improves substantially.
Unlike mortgage-backed securities that hold jumbo or subprime loans, agency mortgage-backed securities carry at least the implicit backing of the government. That means that if the home market soured and owners defaulted on their loans, mortgage-bond holders would still get their money back.

3--Fed Recovery Doubts Spur Investor Bid for Treasuries, Bloomberg

4--A QE rally in search of Main Street confirmation, IFR

Everyone has learned, well, how to play the Fed easing game, and I’d say that the rule is not, as in the old days, “Don’t fight the Fed” but rather “Get in early and then get out.”
If we don’t see improvement in the underlying economy those expanded stock market multiples will begin to look pretty stretched. None of this is to say that that improvement can’t or won’t come, but it really looks as if counting on it is expecting the QE to work better this time, because it will be operating in an environment in which there is less panic and easier conditions.
The key question then is whether there is something special about the Fed’s commitment being open-ended. Will that give investors more faith, so that if the economy still looks sluggish in December they don’t sell stocks?
Possibly, but at that point we might have to accept that the law of diminishing returns still applies if you keep doing the thing which works less and less well.

5--Wage and Salary Growth is Accelerating, Trimtabs

6--Home Sales on Track to Hit 5-Year High, Realty check

7--Chicago Fed: Economic Activity Weakened in August, calculated risk

8--Ignore the Political Optimism, the Planet is in Trouble, oilprice.com

9--Former US President Carter: Venezuelan Electoral System “Best in the World”, global research

10--A Flaw in the QE Expectational Transmission Mechanism? Pragmatic capitalism

11--Currency war warnings follow US Fed’s “quantitative easing”, WSWS

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