1--Spain to Borrow $267 Billion of Debt Amid Rescue Pressure, Bloomberg
2--Cyber Attacks on U.S. Banks Expose Computer Vulnerability, Bloomberg
3--How to Erase a Debt That Isn’t There, NYT
4--The “Pauperization of Europe”, Testosterone Pit
5--Q2 2012 Flow of Funds Overview - Household Net Worth Declined, Corporate Cash Still High, economic populist
Corporate cash is now $1.728 trillion, a decline from Q1 of $21.5 billion. Corporations are still sitting on a boatload of cash, as shown in the below chart which adds up the flow of funds elements which comprise corporate cash
6--Chicago Fed Study Blasts the Lid Off of High Frequency Trading, economic populist
... Mr. Arnuk and Mr. Saluzzi say: enough. At their Lilliputian brokerage firm, they are tilting at the giants of high-frequency trading and warning — loudly — of the dangers they pose. Mr. Saluzzi was the only vocal critic of H.F.T. appointed to a 24-member federal panel that is studying the topic.
Posts from the blog that the two men write have been packaged into a book, “Broken Markets: How High Frequency Trading and Predatory Practices on Wall Street are Destroying Investor Confidence and Your Portfolio,” (FT Press, 2012) which was published in June. They are even getting fan mail.
But they are also making enemies.
Proponents of high-frequency trading call them embittered relics — quixotic, old-school stockbrokers without the skills to compete in sophisticated, modern markets. And, in a sense, those critics are right: they are throwbacks. Both men say they wish Wall Street could go back to a calmer, simpler time, all the way back to, say, 2004 — before the old exchange system splintered and murky private markets sprang up and computers could send the Dow into 1,000-point spasms. (The bottle of Tums Ultra 1000 and the back-pain medication on Mr. Arnuk’s desk here are a testament to their frustrations.)
They have proposed solutions that might seem simple to the uninitiated but look radical to H.F.T. insiders. For instance, the two want to require H.F.T. firms to honor the prices they offer for a stock for at least 50 milliseconds — less than a wink of an eye, but eons in high-frequency time.
Incredible that a 50ms delay is met with so much resistance, but that's how much our stock market has turned into a gambling casino based on the nanosecond response time and skew of a NAND gate in some router. Not exactly investment. Odds are if such a delay is implemented, more bad software design will proliferate, either by trying to hid trades less than 50ms and others attempting to hit the picosecond next to that time interval in execution.
Occupy Wall street and others want transactional taxes to curtail Wall Street excesses, or as they call them Robin Hood taxes. These are small taxes that occur on every trade executed, raising revenue and disincentivizing high frequency trading as well as other types of short hold trading. Needless to say a Tobin tax, or a small fee for a certain number of trades executed in a short time window, would would place speed bumps on the great high frequency trading superhighway.
One thing that can be said, Wall Street is running amok unabated. Seems the great Financial Crisis of 2008 didn't change anything. History doesn't just repeat itself these days, it repeats itself over and over again in the space of 9 nanoseconds.
7--'For the Wealthy, a 28 Percent Solution', NYT
8--Real GDP growth and income inequality, 1929-2010, Jared Bernstein, "on the economy"
9--"Redistribution"; as American as apple pie, NYT
10--Increased MBS issuance could suppress the impact of QE3 on the economy, Housingwire
The third round of quantitative easing will raise the stock market by 3.1% and home prices by nearly 2%, assuming the program lasts through 2013, researchers at Deutsche Bank assert.
But not everyone agrees that the move with translate to helping the average American.
The Federal Reserve’s purchases of Treasuries and mortgage-backed securities will sum to $800 billion by the end of the year. The researchers say the purchases will hold longer-term Treasury yields about 50 basis points lower than they would otherwise.
“These financial market effects should eventually be passed through to more than a 0.6% boost to the level of gross domestic product over the next two years, enough to add about 500,000 jobs and reduce the unemployment rate by 0.3% points,” Deutsche Bank said in a research note.
But Deutsche Bank cautions that the expected impact of QE3 is dependent on the fraction of outstanding MBS the Fed ultimately purchases.
Increased MBS issuance could suppress the impact of QE3 on the economy, although the Fed would certainly be willing to live with this outcome.
Still, an improved outlook for growth and earnings and lower borrowing costs should encourage business investment
QE3 to elevate stock market, home prices: Deutsche Bank
11--US MORTGAGE MEMO: New World Of MBS Buying By The Fed, MNI
It is true that the Fed is buying a good portion of the new supply that comes into the market from the mortgage originators. But the impressive profit taking from money managers is also bringing more bonds into the market.
Market sources also remind that this sector tightened sharply in anticipation of the Fed buying and it gapped tighter on the announcement of the fact.
In general, people think the market over shot on the upside and now it must find an equilibrium level. The big question is what that level should be.
People must also wait to see how the Fed's move affects mortgage rates and originator supply. These factors do not respond as quickly as the markets do.
The mortgage strategy team at Citi say based on current prepayment trends, the Fed's purchases each month ($40 billion from QE3 and about $25 billion from its ongoing prepayment reinvestment program) will absorb about 50% of the gross issuance which they peg at $130-140 billion per month.
Looking ahead, Citi says the market will be driven by potential profit taking, the performance of the dollar rolls and implied volatilities.
If rates stay around current levels, Citi thinks MBS could tighten further. But if rates selloff materially, MBS could struggle.
Citi also says potential supply could come into the market from paydowns on the GSE and foreign debt holdings but it suspects most will come from money managers who have been overweight awaiting QE3.
12--3 Reasons QE3 Won't Help Housing, Daily Finance
1. Banks aren't interested in stepping up mortgage writing. According to a report in the Financial Times, banks are already behind in the mortgage-writing department, and don't plan to hire additional staff to help process additional work. QE3 will help bloat prices of mortgage-backed securities, though, which will increase banks' profits through MBS sales. This has helped buoy stock prices of big banks like JPMorgan Chase (NYS: JPM) , Bank of America (NYS: BAC) , Citigroup, and Wells Fargo (NYS: WFC) . Of the group, Wells Fargo commands nearly one-third of the mortgage-writing business and should benefit the most from the current open-ended MBS buying spree.
Knowing this, there seems no incentive for banks to relax tight lending standards that have hamstrung many buyers. A recent report showed that more than half of all new loans written last month were sold to buyers with credit scores greater than 740 -- compared to 41% during the early 2000s. Even FHA rules seem to be tightening up: Despite the official line that prime loans start with a credit score of 660, the average score tallied for loan denials was 669, versus the 2001 average of 656.
2. Loans won't really become any cheaper. With banks being busy as bees and backed up with new and refinanced loan paperwork, there is no reason to expect them to pass on any lower rates to borrowers they don't want to see in the first place. With some banks, like Bank of America, stepping back from mortgage originations, competition is not fierce in the industry -- and, as some have noted, banks aren't required to offer rock-bottom rates to consumers.
Even if rates do drop, it will take months for the effects of QE3 to trickle down to borrowers, and it may not be enough to make a difference...An analyst from PNC Financial (NYS: PNC) predicts 30-year rates to fall to 3.5% by year's end, and probably another quarter percent beyond that, because of quantitative easing.
There's another reason banks don't want to lower interest rates for borrowers, and it has to do with MBS sales. The New York Times notes that banks make much more on bundled mortgage securities containing loans with higher interest rates, and they don't plan to change that scenario anytime soon.
Current FHA 30 year fixed mortgage rates are at 3.125%, FHA 15 year fixed mortgage interest rates are at 2.625% and FHA 5/1 ARM loan rates are at 2.625%. Down payments as low as 3.5% and flexible credit qualifying attracts many borrowers to FHA mortgages, especially first time home buyers. Funds for the down payment can come from FHA acceptable sources such as gifts and housing grants or loans. Non-traditional credit, such as utility payments, can also be used to receive approval. Since FHA closing costs (APR) are known to be high due to the upfront mortgage insurance premium and other FHA fees, these expenses can be added to the loan amount in most cases. FHA also allows payment through seller concessions that meet their guidelines. The FHA streamline refinance with no cash out is an FHA benefit that allows borrowers to refinance with no documentation and no need of an appraisal. Until the end of 2013, borrowers who have loans that were endorsed prior to June 1, 2009 can obtain the FHA streamline with reduced upfront and annual mortgage insurance premiums. To find out more information about the FHA streamline refinance and other FHA mortgages, submitting the online form will return a response almost instantly.
14--Long-term real yields hit another record low, punishing US savers, sober look
15--The Problem is a Collapsed Housing Bubble, Not a Financial Crisis, CEPR
It is remarkable how people keep insisting, in spite of all the evidence to the contrary, that the problem of the downturn is a financial crisis rather than simply a collapsed housing bubble. The latter story is simple. Housing construction was driven by bubble-inflated prices. When prices plunged, construction collapsed. Not only did we no longer have inflated prices to drive construction, we also had an enormous oversupply as a result of 5 years of near record rates of construction. From 2006 to 2009 construction fell by more than 4 percentage points of GDP, leading to a loss of more than $600 billion in annual demand.
In addition, the loss of $8 trillion in housing wealth lead to sharp falloff in consumption. While the housing wealth effect is a long-established and widely accepted economic phenomenon, most discussions of the financial crisis act as though this effect does not exist. The wealth created by the run-up in house prices led to a consumption boom as the saving rate fell to near zero. With the collapse of the bubble, consumption fell back as the wealth that has been driving it disappeared.
16--Austerity budgets imposed across Europe, WSWS
17--What is behind the global stock market rally?, WSWS
The boom in stock prices is an expression of a global redistribution of wealth from the bottom to the top. The social conditions of the working class have been driven relentlessly downwards, while trillions of dollars have been turned over to the banks, mainly for the purpose of financial speculation.
This process is particularly evident in the United States, the center of world capitalism and the center of the global economic crisis.
The three major stock indexes have nearly doubled in value since 2009, and the fortunes of the super-rich have risen accordingly. The richest 400 billionaires in the US had a net worth of $1.27 trillion in 2009. This already obscene figure shot up to $1.7 trillion in this year's list, an increase of 33 percent in just three years.
CEO pay has followed a similar course. The average CEO of one of the 350 largest US companies took home $12.14 million in 2011, up from $12.04 million in 2010 and $10.36 million in 2009, according to the Economic Policy Institute.
But for the working population, the situation is exactly the opposite. Between 2009 and 2011, the most recent year for which figures are available, the number of people in poverty in the United States grew by 2.6 million, to 49 million. Mass unemployment has been utilized as a lever to impose wage cuts in every sector of the economy