Tuesday, October 30, 2012

Today's links

1--Restricting MLS inventory is reviving homebuilding, oc housing

2--ANALYST: Canadian Home Prices Will Plunge 25% From Here, BI

3--Moody's May Downgrade Canadian Banks - Analyst Blog, Nasdaq

4--Everything you need to know about Canada’s housing ‘bubble’, BI

5--Romney: Privatize disaster relief, econbrowser

6--Consumer spending growth back to pre-bubble trend; significant risks to the downside remain, sober look

7--Outflows from equity funds, sober look

8-The Risk of the Cliff in one Paragraph…prag cap
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I liked this paragraph summarizing last Friday’s GDP report since it so succinctly summarizes the balance sheet recession and the risk of the fiscal cliff (via WSJ):
It is hard to look at today’s report and miss the contribution provided by the government. With defense spending surging, overall government spending contributed 0.7 ppts to the GDP figure, the largest contribution since 2009 when the recovery was first taking hold… Prior to the current expansion, 2.0% growth wouldn’t be celebrated, it would have been feared. Personal consumption is a much smaller contributor to GDP growth during the current expansion while government consumption, which has normally been a boost to GDP, has been, outside of this quarter, a drag on growth. With net exports still dragging on GDP, it’s been private investment that’s picked up the slack and that’s why the fiscal cliff is so very concerning. If businesses slow down, as they did this quarter, then government has to pick up the slack. –Dan Greenhaus,
 
9--FHFA: 30-year mortgage rate edges up, Housingwire  

Sunday, October 28, 2012

Today's links

1--The IMF Austerity Debacle, smirking chimp

On October 12th the Washington Post came out with the following headline: “IMF: Austerity is much worse for the economy than we thought”.
Quote:
“Earlier this week, the International Monetary Fund made a striking admission in its new World Economic Outlook. The IMF’s chief economist, Olivier Blanchard, explained that recent efforts among wealthy countries to shrink their deficits — through tax hikes and spending cuts — have been causing far more economic damage than experts had assumed.”

2--Higher Household Debt Primarily Means Fewer Foreclosures, Dean Baker

The NYT badly misinterpreted data suggesting that household debt may soon be rising again. The NYT noted the fact that households may be taking on debt again on net and argued that this may presage an uptick in the economy. In fact, it suggest nothing of the sort.
At any point in time tens of millions of households are taking on new debt by buying homes, taking out student loans, borrowing against a credit or card or taking out other loans. At the same time, tens of millions of families are reducing their debt, most importantly by paying down mortgages. In addition, much debt is being eliminated as a result of being written off by creditors, mostly through bankruptcy or foreclosure.
The reason that debt has been falling in the last few years has been due to the large amount of debt being written off, primarily as a result of foreclosures. To get an idea of this magnitude, suppose that 1 million homes a year go through the foreclosure process. If we assume an average mortgage of $200,000 a home (roughly the magnitudes involved), this would imply the elimination of $200 billion in debt each year, assuming that the households taking on new debt were just balanced by the households paying off debt. If the number of foreclosures fell in half to 500,000, and nothing else changed, then the rate at which debt was being reduced would fall to $100 billion a year.

3--Don't count on an accurate vote count, Harvey Wasserman

The idea that the Chamber of Commerce and the GOP's horde of billionaire backers would spend hundreds of millions of dollars to capture the White House and Congress but stop short of a few electronic key strokes is nonsensical.

  • Exit polling has proven accurate to within 1% of the vote – the gold standard for detecting vote tampering in other countries such as Germany, which uses paper ballots. In the U.S., when exit polls don’t match the vote count, there’s no investigation into tampering. Exit polls are always “adjusted” late election night to conform to the ultimate “official” vote count, even though shifts in Ohio 2004 and elsewhere were virtually statistically impossible. This election, exit polling will not happen in 19 states.
    • Despite an almost total blackout from the corporate media, the Romney family has a personal ownership (through the investment firms Solamere and H.I.G. Capital) in Hart Intercivic, which owns, maintains, programs and will tabulate alleged votes on machines in the critical swing states of Ohio, Florida, Virginia and Colorado. Despite various official disclaimers, the election could be decided on Hart machines producing "vote counts" with little connection to how 18 million people actually voted.
    • It is inconceivable that the Romney chain of ownership in Hart Intercivic will not influence how that goes. The story has gotten widespread circulation on the internet, but has been ignored or dismissed by most of the corporate media and attacked by the Democratic Party. Petitions at Moveon.org and elsewhere call for a Department of Justice investigation. Tens of thousands of citizens have signed on. But there is no legally binding way by which a professionally rigged electronic vote count can be overturned or even definitively discovered except through the use of unabridged but legally inconsequential exit polling.
    • Scytl, a Barcelona-based e-voting company, has been contracted to count votes in 26 states through the easily rigged Federal Overseas Voting Program. FVAP is ostensibly geared to let military and other overseas Americans vote absentee by electronic means. But Scytl is positioned to intercept and redistribute such overseas electronic votes as needed through its spyware sister company, CarrierIQ. In a close race, these "votes" can be distributed at will to make the difference in critical swing states.
    • Other key voting machine companies, such as ES&S, Dominion, Command Central and more, are controlled by major corporations, some of whose owners are outspoken in their support for the Republican Party. Such support is reminiscent of Diebold owner Walden O’Dell, whose election software and machines helped give George W. Bush a second term in 2004, as O’Dell promised.
    • Republicans hold the governorships in the nine critical swing states of Florida, Virginia, Pennsylvania, Ohio, Michigan, Wisconsin, Iowa, New Mexico and Arizona. They also hold the secretaries of state offices in all of those states but Wisconsin. Electronically flipping the vote count in any or all of them, with Hart Intercivic, Scytl, Dominion or other technologies, can be done quickly, simply and invisibly, with no public recourse.
    4--The progressive case againt Obama, Salon

    Many will claim that Obama was stymied by a Republican Congress. But the primary policy framework Obama put in place – the bailouts, took place during the transition and the immediate months after the election, when Obama had enormous leverage over the Bush administration and then a dominant Democratic Party in Congress. In fact, during the transition itself, Bush’s Treasury Secretary Hank Paulson offered a deal to Barney Frank, to force banks to write down mortgages and stem foreclosures if Barney would speed up the release of TARP money. Paulson demanded, as a condition of the deal, that Obama sign off on it. Barney said fine, but to his surprise, the incoming president vetoed the deal. Yup, you heard that right — the Bush administration was willing to write down mortgages in response to Democratic pressure, but it was Obama who said no, we want a foreclosure crisis. And with Neil Barofsky’s book ”Bailout,” we see why. Tim Geithner said, in private meetings, that the foreclosure mitigation programs were not meant to mitigate foreclosures, but to spread out pain for the banks, the famous “foam the runway” comment. This central lie is key to the entire Obama economic strategy. It is not that Obama was stymied by Congress, or was up against a system, or faced a massive crisis, which led to the shape of the economy we see today. Rather, Obama had a handshake deal to help the middle class offered to him by Paulson, and Obama said no. He was not constrained by anything but his own policy instincts. And the reflation of corporate profits and financial assets and death of the middle class were the predictable results

     But it makes sense once you realize that his policy architecture coheres with a Romney-like philosophy that there is one set of rules for the little people, and another for the important people. It’s why the administration quietly pushed Chinese investment in American infrastructure, seeks to privatize public education, removed labor protections from the FAA authorization bill, and inserted a provision into the stimulus bill ensuring AIG bonuses would be paid, and then lied about it to avoid blame. Wall Street speculator who rigged markets are simply smart and savvy businessmen, as Obama called Lloyd Blankfein and Jamie Dimon, whereas the millions who fell prey to their predatory lending schemes are irresponsible borrowers. And it’s why Obama is explicitly targeting entitlements, insurance programs for which Americans paid. Obama wants to preserve these programs for the “most vulnerable,” but that’s still a taking. Did not every American pay into Social Security and Medicare? ...

    We must fight this thuggish political culture Bush popularized, and Obama solidified in place...

    If there had been an actual full-scale financial meltdown in 2008 without a bailout, while it would have been bad, it probably would have given us a fighting chance of warding off planetary catastrophe and reorganizing our politics. Instead the oligarchs took control, because we weren’t willing to face them down when we needed to show courage. So now we have the worst of all worlds, an inevitably worse crisis and an even more authoritarian structure of governance.

    5--Sinking Europe, sober look

    Markit: - The Eurozone sank further into decline at the start of the fourth quarter, with the combined output of themanufacturing and service sectors dropping at the fastest rate since June 2009.

    The Markit Eurozone PMI® Composite Output Index fell for a third successive month, down from 46.1 in September to 45.8 in October, according to the preliminary ‘flash’ reading based on around 85% of usual monthly replies. Output has fallen continually since September of last year with the exception of a marginal increase in January.

    Output continued to fall in response to a further marked contraction in new orders. The rate of decline in new business eased slightly since September, which had seen the largest drop since June 2009...

    Households surveys in the Eurozone paint a similarly bleak picture. The EC consumer confidence (which ticked up slightly), expectations for the economy, and particularly personal finances are all quite weak. In fact the expectation of "own financial situation in the next 12 months" touched the all-time low reached in 2008. Eurozone households have completely lost confidence in the sustainability of their personal finances going forward.

    6---As Surge Ends, ‘Stalemate’ in Afghanistan Predicted, antiwar

    7--As US and allies shift away from Afghan combat, some see stalemate even as Taliban weaken, WA Post

    What began in October 2001 under the Pentagon’s hopeful banner of “Operation Enduring Freedom” has hardened into enduring resistance. The Taliban take heavy losses but regenerate as fast as they fall. They also maintain links to a range of other extremist groups, including al-Qaida and the Pakistan-based Haqqani network....

    U.S. Defense Secretary Leon Panetta, who championed the additional American troops, remains optimistic.
    “We’ve come too far, we’ve fought too many battles, we have spilled too much blood not to finish the job that we are all about,” Panetta said in Brussels this month after meeting with his counterparts from NATO nations.
    The “job” Panetta referenced is no longer to defeat the Taliban before 2015 or to eradicate al-Qaida in its Afghan redoubts, but to create an Afghan security force that can at least hold the substantial gains achieved by the U.S.-led international alliance...

    Some U.S. commanders express worry that no matter how much better the Afghan forces get before most Western forces go home in 2014, it could all be for naught if the Afghan government fails to strengthen its legitimacy in the eyes of ordinary Afghans.
    Adding to a sense of unease is anger over a rising number of killings of U.S. and coalition troops by Afghan soldiers and police out of personal pique or in apparent sympathy with the Taliban. At least 57 coalition personnel, mostly Americans, have been killed so far this year in 40 “insider attacks.” The latest was Thursday, when two U.S. servicemen were killed by a gunman in an Afghan police uniform.
    After a spurt of insider attacks in August and September, one of Congress’ most vocal advocates of pursuing the war, U.S. Sen. John McCain, R-Ariz., was so fed up that he called for a re-evaluation of the Obama administration’s troop withdrawal plan, saying it might need to be speeded up. He later said that was a bad option.
    American public support for the war has dropped precipitously during Obama’s term in the White House.
    A Pew Research Center poll in early October found that 60 percent of respondents favored removing U.S. troops from Afghanistan as soon as possible, with 35 percent saying they should stay until the country is stable. That’s a nearly complete reversal from a September 2008 Pew Research poll that showed 33 percent wanted troops out as soon as possible and 61 percent said they should stay until the country has stabilized.

    Saturday, October 27, 2012

    Today's links

    1--Home Prices Rise, but Analysts See Pressure Ahead, CNBC

    Nationally, prices rose 2.6 percent in August, according to a repeat sales index from Lender Processing Services. Prices are up an even stronger 4.6 percent from the beginning of 2012. Much of the gains are due to big drops in sales and volumes of distressed properties (foreclosures and short sales).

    The share of distressed properties in total home sales fell to a record low of 38.6 percent in September according to an index from Campbell/Inside Mortgage Finance. That is based on a three-month moving average. The “Housing Pulse” index is down 10 percentage points from the near-record-high 48.7 percent recorded in February of this year.

    “The precipitous drop in the share of distressed properties in the housing market is largely attributable to fewer foreclosed properties or real estate owned (REO) being put up for sale by banks,” according to the report. “HousingPulse respondents reported in October that major banks appear to be keeping many REO properties off the market this year. But they also suggest banks may be looking to unload significant amounts of REO next year — a move that could put downward pressure on home prices.”

    The impact the the dwindling number of foreclosed properties is having on home prices is most obvious in markets like Phoenix, where distressed sales made up the bulk of the market for the last few years. Prices there are up 17 percent from a year ago, although still down 41 percent from their peak in 2006, according to LPS.
     
    2--Stiglitz on inequality, Daily Ticker
     
    "America has the least equality of opportunity of any of the advanced industrial economies," Stiglitz says. In short, the status you're born into — whether rich or poor — is more likely to be the status of your adult life in America vs. any other advanced economy, including 'Old Europe'.
    For example, just 8% of students at America's elite universities come from households in the bottom 50% of income, Stiglitz says, even as those universities are "needs blind" — meaning admission isn't predicated on your ability to pay.

    "There's not much mobility up and down," he says. "The chances of someone from the top [income bracket] who doesn't do very well in school are better than someone from the bottom who does well in school."

    Because the children of those at the top of society tend to do better than those at the bottom — thanks, in part, to better education, health care and nutrition — the income inequality that's slowly emerged over the past 30 years will only widen in the next 10 to 20 years.

    If the root causes of income inequality go unaddressed, America will truly become a two-class society and look much more like a third world economy, Stiglitz warns. "People will live in gated communities with armed guards. It's a ugly picture. There will be political, social and economic turmoil." (Hence the book's subtitle: 'How Today's Divided Society Endangers Our Future')
    The good news is Stiglitz believes this "nightmare we're slowly marching toward" can be avoided, citing Brazil's experience since the early 1990s as an example of a country that has reduced income inequality. Among other things, he recommends improving education and nutrition for those at the bottom of society, and eliminating "corporate welfare" and other policies which "create wealth but not economic growth." ...

    "What I want is a more dynamic economy and a fairer society," he says, suggesting income inequality is ultimately detrimental to those at the top, too. "My point is we've created an economy that is not in accord with the principles of the free market.

    3--How Barack Obama Vindicated 'The Cult of the Presidency', Atlantic

    Published in the spring of 2008, Gene Healy's book The Cult of the Presidency argued that the Bush Administration's alarming expansion of executive power couldn't be completely explained by fear of Islamist terrorism, the ideology of Dick Cheney, or the machinations of David Addington and John Yoo. Critics were right to decry their excesses at home and abroad, and to worry about an Imperial Presidency taking hold in America. "But the problem cannot be solved simply by bringing a new administration to power," Healy wrote. "The fault lies not in our leaders but in ourselves. When our scholars lionize presidents who break free from constitutional restraints, when our columnists and talking heads repeatedly call upon the 'commander in chief' to dream great dreams and seek the power to achieve them -- when voters look to the president for salvation from all problems great and small -- should we really be surprised that the presidency has burst its constitutional bonds and grown powerful enough to threaten American liberty?"

    4--Orders for U.S. Capital Goods Stagnate as Spending Slumps, Bloomberg

    5--Further cuts leading to collapse of Greek health system, WSWS

    Every newly released detail of the fifth Greek austerity package demonstrates that the European Union is prepared to resort to the most brutal measures to secure the profits of speculators. One of the hardest hit victims of the austerity program dictated by the EU and the IMF is the Greek health sector. In the heart of Europe a large proportion of the population is being deprived of any sort of health care.

    On Wednesday a number of newspapers reported that the Greek government has agreed to a new austerity package with representatives of the IMF and the EU. A final decision will be made on Sunday. According to the reports, the package includes not only further cuts to wages and pensions and mass redundancies but also more cuts to the health system. Already decided are savings in health care totaling €2 billion. Part of this sum is to be achieved by laying off 10 percent of doctors and other staff in public hospitals.

    This decision could lead to the ultimate collapse of the country’s hospitals. There are already daily protests by doctors, nurses and patients all over the country directed against the catastrophic conditions in the health sector. In June the Greek Medical Association brought the seriousness of the situation to the attention of the United Nations.

    According to the aid organization “Doctors without Borders”, the funding of public hospitals has plummeted by 40 percent since 2008, while demand for treatment has increased significantly. Serious shortages have developed because health service suppliers cannot be paid on time under such circumstances.

    In some cases vital operations cannot be carried out because suppliers refuse to provide the necessary medicines and/or equipment. The Greek daily Ta Nea reported on a clinic in Thessaloniki, which is no longer able to perform heart surgery due to a lack of stents. In the hospital of the central Greek city of Larisa toilet paper was unavailable for a period of time. Other practices and hospitals have reported a lack of pharmaceutical alcohol for cleaning wounds

    6--A new downturn in the global economy, WSWS

    There are increasing signs that the global economy is about to enter a new period of financial turbulence, coupled with deepening recession in a growing number of countries.

    In the immediate aftermath of the global economic breakdown that began in 2008, set off by the collapse of the US investment bank Lehman Brothers, governments around the world took on increased debt as they made available trillions of dollars to prevent a complete collapse of the financial system. Meetings of the Group of 20 were dominated by pledges there would be no return to the conditions of the 1930s and assurances that the lessons of history had been learned.

    The writings of John Maynard Keynes, the British economist of the 1930s who advocated increased government spending to counter depressions, were suddenly back in vogue. But a sharp turn came in June 2010, when a meeting of the G20 initiated a turn to austerity, emphasising the necessity to impose “fiscal consolidation.” The essence of this program was to claw back the money given to the banks through massive cutbacks to government spending, especially on social services.

    However, this program brought a contraction in economic growth leading to decreased profit opportunities for major corporations. Faced with this situation, the US Federal Reserve initiated a policy of “quantitative easing”—the provision of unlimited supplies of money to banks and financial institutions. Central banks around the world cut interest rates to record lows and followed that up with their own versions of quantitative easing (QE). Under conditions of a stagnant real economy, these measures were aimed at boosting the value of financial assets, thereby providing a new avenue for finance houses to realise speculative profits.

    While the QE program and its equivalents have been touted as a means of preventing a slide into global recession—US Fed Chairman Ben Bernanke claimed the recently enacted QE3 program was motivated by continuing high unemployment—they have done virtually nothing to boost the real economy. Their only significant impact has been to increase profits through financial manipulation, with the ultra-cheap money provided by the central banks.

    But now there are signs that a new stage in the global breakdown is underway, marked by growing recessionary trends, as the impact of the central bankers’ program wanes...

    Overall, US corporate profits and earnings are expected to fall for the first time since 2009. The latest data on the US economy show that gross domestic product (GDP) grew at an annual rate of only 2 percent in the third quarter, well below that required to maintain employment levels. Were it not for the effect of an increase in defence spending, the figure would have been significantly under market expectations.

    The most significant feature of the US GDP data was investment spending. Its continuing decline reduced the overall growth figure by 0.1 percentage points for the quarter, while imports and exports both fell, taking off 0.2 percentage points.

    While the central bankers will continue to pump money into financial markets, these measures will do nothing to turn the situation around. This week, in a major speech, the governor of the Bank of England, Mervyn King, noted that every increase in the money supply had a declining impact on the real economy.

    His warnings are confirmed by historical trends. Writing in the Financial Times, financial analyst Satyajit Das pointed out that between 2001 and 2008, borrowing against the rising value of houses contributed about half the growth in the US. “But ever increasing borrowings are needed to sustain growth. By 2008, $4 to $5 of debt was required to create $1 of US growth, up from $1 to $2 in the 1950s. China now needs $6 to $8 of credit to generate $1 of growth, an increase from around $1 to $2 15-20 years ago.”

    At the meetings of the G20 in 2009, government leaders insisted there would be no return to the protectionist measures of the 1930s which had such a devastating impact on world trade. But the QE program is producing a twenty-first century version of the beggar-thy-neighbour policies of the Great Depression. The flood of money from the US Federal Reserve has pushed down the value of the US dollar, hitting the export markets of its competitors and leading to the development of “currency wars” as they try to maintain their position.

    Furthermore, the boosting of financial assets under conditions of slowing economic growth threatens to replicate the conditions that sparked the 2008 collapse on an even broader scale. This is because, unlike the situation four years ago, the central banks themselves are now heavily involved in financial markets and stand to lose massive amounts in a market collapse.

    The central bankers and capitalist politicians claim that while their actions may not have promoted growth, they have at least averted a return to the conditions of the 1930s. These claims are belied by the conditions in Spain and Greece, where unemployment is already at 1930s levels.

    Moreover, when viewed from an historical perspective, their self-congratulations are somewhat premature. The Great Depression came after a decade of financial and economic turbulence set off by the breakdown of global capitalism that began with the outbreak of World War I in 1914.

    This time around, the capitalist breakdown began with a financial crisis that has now set in motion a deepening contraction in world economy.

    Like their counterparts in an earlier period, the ruling elites have no response to the historic crisis of the profit system other than a social counterrevolution against the working class, militarism, and the imposition of dictatorial forms of rule.

    Far from ending, the global economic crisis is only just beginning

    7--NSA’s secretive surveillance program goes to the Supreme Court, RT

    8--Canada’s Hot Housing Market Chills in September as Prices Drop, WSJ

    Canadian home prices in September fell the most in nearly two years, suggesting that recent changes to the country’s mortgage rules have reined in Canada’s once-hot housing market.

    9--The case against Countrywide, Reuters

    10--U.S. sues BofA, calling loan fraud 'brazen' , LA Times

    The $1-billion civil suit alleges that BofA's Countrywide fraudulently deceived mortgage finance giants Fannie Mae and Freddie Mac into believing the company's risky loans were safe and sound.

    Full Spectrum adopted High-Speed Swim Lane, abbreviated as HSSL or Hustle, so loans would "move forward, never backward" at increasing speed, the suit said.

    "To accomplish these goals, the Hustle removed necessary quality-control 'toll gates' that could slow down the origination process," the U.S. attorney's office said.

    For example, it said, the Hustle eliminated quality-control underwriters from loan production, even for many high-risk loans, such as stated-income loans. "Instead," it said, "the Hustle relied almost exclusively on unqualified and inexperienced clerks, called loan processors" — employees previously deemed unqualified even to answer questions from borrowers.

    Employee compensation was shifted to reward only the volume of loans pushed through, not the quality, alleged the suit, which said Countrywide's own systems detected an unusually high number of defective loans.

    Ultimately, the volume of defective loans became eight to 10 times the average for Fannie and Freddie mortgages, the suit said. Countrywide concealed that from big loan buyers and set up a bonus plan for employees who managed to overrule the internal classification of loans as defective, according to the suit.

    One case cited in the lawsuit involved an Altadena mortgage that defaulted in 10 months. The borrower's listed monthly income of $8,500 was at a nonexistent company with the same name as the borrower, the appraisal overstated the property value 31%, and the loan was put through an automated loan-checking system 58 times before it was approved, "which by itself suggests fraudulent manipulation of data," the suit said.

    The suit also accuses BofA of refusing to buy back flawed loans from Fannie and Freddie or compensating them for the damage caused by the loans

    Friday, October 26, 2012

    Today's links

    1--UK refuses to ‘violate international law’ and aid US in Iran strike prep, RT

    Britain has said that it is not right “at this point in time” for a possible strike on Iran, but is involved in military contingency planning with the US and other allies over Iran, according to the UK newspaper the Guardian.
    ­"The UK would be in breach of international law if it facilitated what amounted to a pre-emptive strike on Iran. It is explicit. The government has been using this to push back against the Americans," a government source told the Guardian, citing secret legal advice.
    The US had pressured Britain for the use of its military bases in Cyprus, as well as facilities on Ascension Island in the Atlantic and Diego Garcia in the Indian Ocean. The attorney general’s office reportedly drafted and circulated legal advice throughout the British government branding a preemptive strike ‘illegal.’
    One government source described the US as “surprised” by Britain’s refusal to provide “upfront assistance.”

    2--Eurozone nears Japan-style trap as money and credit contract again, Telegraph

    "This credit contraction is what happened in Japan in the early 1990 and we have to be careful not get into deflationary spiral," said Prof Richard Werner from Southampton University, a Japan expert. "They to need to launch true QE or an expansion in broad credit creation, and it cant be done easily."

    3-Latest Obama Headfake: Threat to Replace Favorite Housing Scapegoat, FHFA’s Ed DeMarco, naked capitalism

    The October surprises are now coming fast and furious as Obama’s lead is slipping in most polls and on Intrade. So empty gestures to boost turnout in his heretofore spurned Democratic party base are the order of the day.

    4--Why Today's Housing Report Spooked Investors So Much, CNBC

    We know we're coming off the bottom of the housing crash, but over the summer it felt to some like we were rocketing off the bottom. Now, not so much.

    It is a matter of perspective. New home construction is still barely half of what a normal, non-bubble market would look like. Existing home sales are coming off lows from last year, but last year was the hangover from the 2010 home buyer tax credit, so again, a little perspective.

    "The year-over-year gain was the smallest of the year and comps against last year when the housing market was in a full blown double-dip mode," notes analyst Mark Hanson....
     
    "When you compare against 2011 (the tail-end of the homebuyer tax credit hangover and a double dip) when rates were at 5.25 percent versus 2012 with rates at 3.5 percent and supply artificially suppressed due to a surge in mortgage modifications, can-kicking of foreclosures, servicer settlement further reducing distressed supply etc, things are going to look really good," argues Hanson. "But as the 2012 conditions go flat — rates, etc., turn into headwinds -— in 2013 and sales are not coming against a hangover, things will not look as great."
     
    5---Rentier CEOs Advocate Austerity for America, naked capitalism (Deficit Manifesto)
     
    If you look at the 80 CEOs that signed this list, you don’t see a single Silicon Valley or tech darling (well, there is Microsoft, but they are too long in the tooth to be darlings, and one small cap tech company, Investment Technology Group, but it’s on Motley Fool’s current list of 10 Worst Small Cap CEOs, so it proves our point). There’s a complete absence of the sort of companies that America likes to hold up as its winners.
    Instead, the list is heavy with finance, including private equity firms, and mature industries. A sampling:
    AT&T
    Bank of America
    BlackRock
    Clayton & Dubilier (major LBO firm)
    Deloitte Federal Government Services
    Dow Chemical Company
    General Atlantic, LLC (major LBO firm)
    General Electric Company
    Goldman, Sachs & Co.
    HarbourVest Partners, LLC
    Humana Inc.
    JPMorgan Chase & Co.
    Knight Capital Group, Inc.
    Pershing Square Capital Management, L.P.
    Promontory Financial Group
    Silver Lake Partners (a major LBO firm)
    Time Warner Cable Inc.
    Verizon Communications Inc.

    6--What's Up in Bankster Land?, economic populist

    7--80 top CEOs tell Obama, Romney to slash social spending, WSWS

    The chief executives of 80 large US corporations have issued a “Deficit Manifesto,” calling on the next president to “fix America’s debt” by making substantial “changes in the federal budget.” The statement was published by the Wall Street Journal on Thursday.

    Behind the innocuous phrases is the demand by some of the richest individuals in America for the slashing of Medicare, Medicaid and Social Security and a general offensive against the working class.

    The CEOs’ letter, signed by a “Who’s who” of CEOs at giant US banks, financial firms and industrial corporations, calls on politicians to acknowledge “that our growing debt is a serious threat to the economic well-being and security of the United States.” It calls for Washington to adopt “an effective plan [to] stabilize the debt as a share of the economy, and put it on a downward path.”

    The plan should be enacted now, “but implemented gradually to protect the fragile economic recovery and to give Americans time to prepare for the changes in the federal budget.” In other words, their proposals would worsen life for wide layers of the population, who need to “prepare” themselves for a drastic decline in their conditions.

    Making no reference to the trillions of dollars made available to the banks during the financial bailout nor the trillions more that go toward imperialist war and the global defense of their economic interests, the company heads insist that the target of a plan to “fix America’s debt” should concentrate on the programs that assist tens of millions of working people, the poor and retirees.

    They argue that a plan must “Reform Medicare and Medicaid, improve efficiency in the overall health care system and limit future cost growth” and “Strengthen Social Security, so that it is solvent and will be there for future beneficiaries.” These are code words for gutting these programs, which the wealthy consider an intolerable drain on resources.

    The CEO statement also calls for “comprehensive and pro-growth tax reform, which broadens the base, lowers rates, raises revenues and reduces the deficit.” Felix Salmon of Reuters comments, “You can’t have lower rates and higher revenues—not without eviscerating pretty much all of the tax deductions which much of the middle class has learned to rely upon. Mortgage-interest tax relief, the charitable deduction, even the deduction for state and local taxes: pretty much all of them would have to go.”

    Salmon comments sardonically that “the letter basically just says ‘please cut our taxes, raise taxes on everybody else, and cut the benefits they get from Medicare, Medicaid, and Social Security, which are programs we individually don’t rely upon.’

    8-A Closer Look GDP Data, Big Picture
     
    . Perhaps its my own bias, but the details of the GDP report reveal not an organic growth period in a healthy recovering economy, but rather a tepid post-credit crisis expansion highly dependent on government largesse and Federal Reserve accommodation.
    It is about what we should expect: Below-trend growth, as the economy gradually heals, individual and bank balance sheets slowly improve, and the excesses of the prior cycle get wrung out of the system.
    Consider the major factors within this GDP report:
    -Residential construction rose 14.4%. Housing is a bright spot; with sales and prices increasing. However, this has been artificially goosed by the Fed’s ultra low rates and purchases MBS. Mortgage rates are at their lowest levels since WW2, and foreclosure abatements have created an appearance of reduced distress sales. So this portion of GDP is positive but artificial; it added about 0.3% to GDP.
    -Defense Spending rose by 13% — this added 0.6% to GDP. This is not what we want driving GDP, but rather, Ii prefer to see private sector improvements.
    -Business Spending remains soft. Ignore the nonsensical “Uncertainty” trope; if demand were there, businesses would add personnel and make CapEx investments as necessary. (idiotic rationalizations spoon fed to the gullible do not count as intelligent economic analysis to me — and that includes “uncertainty”).
    -Slowing Exports (down 1.6%) took a few bips off of GDP.
    -Midwestern Drought I do recognize that the probably whacked almost half a percentage point from overall GDP numbers (0.1% times 4Qs for an annualized 0.4%).
    By my numbers, half of the GDP gains came from Fed/Uncle Sam. The slowdown in Europe and Asia are pressuring economic activity; the drought took away some of the gains, and without that, we should have seen some more strength.
    Overall, this report suggests that we are not yet in recession, yet, but are barely above stall speed — more like a 1.5% GDP ex-government interventions and drought. The improvements we are seeing seem to be driven mostly by Fed and government intervention.

    9--Weakness the Eurozone credit growth persists; stark contrast with the US, sober look

    Tight credit conditions continue to persist in the Eurozone, inhibiting growth and dampening plans for fiscal consolidation.
    AP via Yahoo: - Another drop in lending to companies in the 17-country eurozone showed the economic downturn is deepening, as a brighter mood on financial markets fails to catch on with businesses.

    The European Central Bank said Thursday that loans to non-bank businesses shrank 1.4 percent year on year in September, double the 0.7 percent contraction reported the month before.
     

     

    Thursday, October 25, 2012

    Today's links



    1--The Central Fact that Folks Don’t Get about Fannie and Freddie’s Role in the Crisis, New economic perspectives

    Fannie and Freddie’s managers bought enormous amounts of endemically fraudulent liar’s loans for the same reasons that the investment banks did – it maximized their bonuses...

    Conservatives, of course, assume that Fannie and Freddie must have sharply increased their purchase of nonprime loans beginning around 2005 because of their “affordable housing” requirements. The investment banks, which had purchased hundreds of billions of dollars of liar’s loans and subprime paper, were never subject to the Community Reinvestment Act (CRA) or any other affordable housing goal. They purchased nonprime paper because of its yield and grotesquely inflated credit rating. Indeed, they often purchased their own collateralized debt obligation (CDO) securities because doing so was a “sure thing” that was guaranteed to maximize reported (albeit fictional) near-term income and the officers’ bonuses. The investment banks’ controlling officers became wealthy by causing “their” investment banks to purchase massive amounts of nonprime paper without any affordable housing goals – so it should be no surprise that Fannie and Freddie’s controlling officers eventually mimicked their fraud strategy....

    The other point is that the reason that liar’s loans proliferated was to allow the lenders to pretend that the borrower had sufficient income to repay the loan by inflating the borrower’s reported income. The famous mortgage industry study [PDF version] of liar’s loans found that 90% of the loan packages inflated the borrowers by at least 5% and that 60% of the loan packages inflated the borrower’s income by more than 50 percent.

    2--Work sharing in Germany lowers unemployment, CEPR

    In spite of having comparable growth, the unemployment rate in Germany is more than 2 full percentage points below its pre-recession level. By contrast, the unemployment rate in the United States is 3.3 percentage points above its pre-recession level. The difference is that Germany encourages employers to reduce workers' hours rather than lay them off. The result is that many workers are putting in fewer hours, but still have jobs in Germany. The government makes up for most of the lost pay with money that would otherwise have gone to unemployment benefits.
    While close to half of the states have work sharing programs as part of their unemployment insurance program, the take-up rate is very low. The Obama administration has attempted to increase take-up by having the federal government pick up the cost for the next two years. (This measure was attached to the bill that extended the payroll tax cut.) However, because most state budgets are so flush, there has been little interest in getting this money from the federal government.

    3--Shadow inventory is growing, OC Housing News

    September delinquencies skyrocket 7.72%, foreclosure filings decline 20.4%, shadow inventory grows

    4--Obama institutionalizes state assassinations, WSWS

    The Obama administration has created a new extra-legal system known as the “disposition matrix” to institutionalize the selection and targeting of enemies of the US state for assassination, according to an article published Wednesday in the Washington Post.

    The Post reports that the system is “designed to go beyond existing kill lists,” creating a centralized data base that contains “the names of terrorism suspects arrayed against an accounting of the resources being marshaled to track them down, including sealed indictments and clandestine operations.”

    Wednesday, October 24, 2012

    Today's links

    1--Investor Participation in the Home-Buying Market, Atlanta Fed

    ...institutional investors ramped up activity earlier this year and have indeed concentrated their investment activity within a handful of markets that were hit hard by the housing downturn.

     Acquisition strategies for these larger investors focus on mostly low-priced, distressed properties.
    This makes sense. The markets hit hardest by the housing downturn are also the markets where distressed properties make up a significant portion of the available homes for sale. However, data from CoreLogic indicates that the share of distressed sales is steadily declining over time. As the distressed sales share continues to shrink and home prices continue to rise, it stands to reason that investment activity will shrink (or continue to shrink).

    It was recently noted that Och-Ziff Capital Management Group LLC, a large institutional investor (not outlined in the table above), announced that it intends to exit this line of business. Perhaps it is just a matter of time before other large investors follow suit.

    2--Phoenix Picked Clean, Private Equity Descends on Atlanta, Bloomberg

    Renting a house was 57 percent more expensive than owning in Atlanta in August, the same as a year earlier, according to Trulia Inc.

    Higher rents make it more profitable for private equity firms to buy and lease properties to tenants, many of whom don’t have the necessary credit score or downpayment to finance a purchase.
    In Phoenix, owning is 49 percent cheaper than renting, narrowing from 55 percent cheaper a year earlier. The gap narrowed even as 30-year mortgage rates fell by an average 1 percentage point to 3.5 percent, according to Trulia economist Jed Kolko.
    “Rising Phoenix prices outweighed falling mortgage rates,” Kolko said in an e-mail.
    Phoenix Prices

    Phoenix-area median single-family home prices jumped 34 percent in August from a year earlier to $150,000, according to an Oct. 2 report by Michael Orr, director of real estate research at Arizona State University’s W.P. Carey School of Business. The supply of all homes for sale in September fell 28 percent from a year earlier while distressed listings --bank- owned properties and short sales -- were 63 percent below year- earlier totals, Orr reported.

    Investors accounted for 39 percent of August transactions in Maricopa County, which includes Phoenix, Orr said. More than half of all homes below $150,000 were purchased with cash, he said. Rising prices are persuading investors to look elsewhere.

    “We’ve seen some big players move away and others replace them,” Orr said in a telephone interview from Phoenix. “The new players are happy with 6 percent cash-on-cash return. Last year they would scoff at that. They wanted 12 percent to 15 percent last year, but that’s not possible here anymore.”...

    Arizona and Georgia are both non-judicial foreclosure states, which means it takes less time for lenders to repossess homes from delinquent borrowers than states that require judicial review.
    Homeowners in Arizona were delinquent for an average of 500 days before banks seized their properties, while in Georgia it took about 461 days, compared with a U.S. average of 688 days, according to Lender Processing Services Inc. (LPS) The average was 1,037 days in Florida, a judicial state which has the largest foreclosure backlog as a share of mortgaged homes, and 1,014 days in New York.

    3--Obama Moves to Make the "War on Terror" Permanent, Info Clearinghouse

    4--Remembering Russel Means, Info clearinghouse video

    5--Downturn to continue for a generation, Bank of England governor warns, WSWS

    6--Bernanke Seen Attacking Jobless Rate With QE Through 2013, Bloomberg

    7--Are US households about to re-lever? That's the implication of CBO's latest forecast, sober look

    8--US State Dept. Demands Lebanon Form New Govt., antiwar.com

    9--Home Builders Need Mortgage Bankers to Keep Recovery Alive, CNBC

    Despite the Federal Reserve’s $40 billion weekly infusion into agency mortgage backed securities, mortgage rates are just barely below where they were before the announcement of so-called QE3. Rates did fall immediately after the announcement, but with the 30-year fixed bouncing back up to 3.63 percent from mortgage applications fell dramatically, down 12 percent overall. Refinances fell the hardest last week, down 13 percent, but applications to purchase a home weren’t far behind, down just over 8 percent week-to-week.

    “Wow, that was quick. Ahead of today's 2nd day of the FOMC meeting, the MBA said both applications for refi's and purchases are now below the levels of mid Sept when the Fed decided to further help the housing market with more QE,” writes analyst Peter Boockvar of Miller Tabak. “The costs of an eventual Fed exit will far outweigh any benefits.”

    Why are mortgage rates rising again? Because even though the ten-year Treasury yield, which mortgage rates generally track, is above where it was before the Fed’s announcement of QE2, the greater demand by the Fed for MBS is being met by plenty of supply in the form of big refinance volume. The banks are not passing through the discounts they are getting to consumers due to tighter lending standards and rising fees.

    Tuesday, October 23, 2012

    Today's links

    1--Disproving the housing bulls, OC Housing

    From Mark Hanson report:  Each month we tear apart the monthly housing resale and new home sales data in search of items consistent or inconsistent with the consensus view that US housing is experiencing a “full blown, durable recovery with escape velocity and v-bottom that will last for years...

    I will quickly review the data that has me looking looking elsewhere than “recovery” for answers and should have perma housing bulls overweight this sector looking at a hedge or three.
    Data Overview
    • Housing Demand by Buyer Cohort…very forward looking. Points to significant demand slowing here and now
    • A Serious Negative...Investors volume NEGATIVE YoY
    • A closer look at the Demand equation…First Timers and Investors Flat to Lower / Repeats driving this market until they go away as well in the off season
    • Builder Sales – Not as “Robust as Headlines would have you believe
    • Santa Clara County…past 7-years pending sales. Closing in on record lows
    This one caught my attention because it demonstrates that withholding supply may cause prices to go up, but it also causes sales volumes to plummet....

  • Record Low Supply…a function of never ending foreclosure process delays and 6 million mortgage mods created in the past 2.5 years, which in structure, are worse than Subprime loans ever were; and 50% of all mortgage’d homeowners being zombies.
  • House price gains…a function of the Fed Twist Ops plunge in rates of 150bps YoY increasing “purchasing power” by 15%
  • The one bright spot…but it’s transitory – Organic Repeat Buyers will go away as quickly as they came
  • Item 1) Housing Demand by Buyer Cohort…very forward looking. Points to significant demand slowing here and now
    a) First-Timer demand went flat in May and have remained there for months. Shows house prices already out of whack with flat incomes of first timers...

    b) Investor demand DOWN YoY in August. This cohort won’t come back until Foreclosures start churning back up. Remember, if Foreclosures triple I will be bullish housing.
    This is a big deal. The big hedge funds pulled out of Phoenix as they’ve already driven prices up about 30% off the bottom, and the returns don’t make sense any more. They will return if prices drop, but I foresee a big decline in Phoenix area sales until the first-time homebuyer demand comes back. I expect to see a strong increase in prices in Las Vegas over the next year or two until prices there reach the same investor return thresholds where the hedge funds lose interest.
    c) Repeat Buyers carrying this market…a temporary phenomenon. Low rates and ample supply at mid-to-high end has drawn out years of pent-up supply. But this cohort is thin and weak relative to any time before in history, as over 50% do not have the equity in their present house to sell and rebuy or the credit to get a loan....
    Bottom line, the August Existing Home Sales consensus ‘beat’ came exclusively from a late season surge in “repeat” buyer ‘closings’. This is unsustainable…they are a seasonal cohort. Moreover, I think much of this has to do with short sales closing not only ahead of the school year but the Bush 2007 Mortgage Relief Act fiscal cliff.
     
    2--CFPB Mortgage Rule Said to Give Lenders More Protection, Bloomberg

    U.S. lenders may get strong protections from lawsuits over most government-backed mortgages under rules being weighed by the Consumer Financial Protection Bureau, according to two people briefed on the policy.
    The so-called qualified mortgage regulations would give banks including JPMorgan Chase & Co. (JPM) and Wells Fargo & Co. (WFC)safeguards against legal action arising from the underwriting process, according to the people who spoke on condition of anonymity because the discussions aren’t public. Protections would cover loans issued at prime interest rates to borrowers whose total debt-to-income ratio doesn’t exceed 43 percent. 

    3--The big money moves into housing, Dr Housing Bubble

    There is little doubt that big money is now in the housing game. I love the title of this Bloomberg story: Phoenix Picked Clean, Private Equity Descends on Atlanta:
    “(Bloomberg) Wall Street has got billions and billions of dollars they need to place and it has been determined they want to come into this segment. There are only handful of markets that that’s going to go into. This is one of them that has not seen the appreciation. If I had another chance to go back to Phoenix and wind the clock back 12 months, that’s what I think this is.”..
     
    In Phoenix investor purchases have been hovering around 50 percent for almost three years. Investors are understanding this is unsustainable and are pulling out of markets and going to other places like Atlanta that saw home prices crash on a later trajectory compared to places like Arizona. At the peak some 20,000 homes were selling each month. For the latest month of data we have 8,979 homes sold, a drop of 4 percent from the last year.
    Mind you that the median home price went from $118,000 to $154,000 so it is unlikely to break many investors unless they over leverage or simply purchase in weaker areas. Yet many are going in with all cash. It is also interesting noting the large number of FHA insured buyers in the mix.

    4--The median price in Phoenix is up over 30 percent year over year. , Dr Housing Bubble

     You read correctly, the year over year median price is up by 30 percent. Did incomes go up by this much? Of course not. For years you have nearly half of all properties being bought in this market going to investors. Rent prices have surged while banks leisurely leak out inventory while shelling out the best deals to other financial institutions with deep wallets. In other words all the bailouts were to create another bubble and crowd out the typical buyer and also, squeeze the wallets of many renters who probably are not able to buy.
    Going back to the paragraphs above, the fact that investors are bidding prices up by $75,000 to $100,000 over market valuations in this current economy is very reminiscent to a mania. If you view the world through the lens of a hammer everything looks like a nail. These bulk investors are diving in head first here and entry level buyers are competing against large funds. This bubble is different. During the early 2000s you were basically competing against anyone with a pulse. Today you are competing with big pocket investors, hedge funds, flippers, and large real estate investment funds.

    5--Where is all this distressed supply, CNBC

    So where is all this distressed supply, given that there are still 5.45 million homes with mortgages that are either delinquent or in the foreclosure process (per LPS Applied Analytics)?...

    The biggest problem is that regular home sellers are not putting their homes on the market at a high enough rate to offset the drop in distressed volumes. Why? Part of it is still a lack of confidence in the market, but most of it that, as of August, about 15 million homeowners still owed more on their mortgages than their homes were worth, according to Zillow. That’s 31 percent of homes with a mortgage. Negative equity and near negative equity is largely what is holding the market back now, even as distressed homes slowly move out of the system.

    Given the huge drops in sales and inventory out West, which had been driving much of the gains in the overall market, some analysts predict deeper sales drops in the coming months. While sales of higher priced homes are up considerably from a year ago, they still make up a very small share of the total market. About 65 percent of the market is made up of homes priced lower than $250,000. These are a lot of numbers to digest, but they add up to a still bumpy recovery ahead for housing
     
    the problem is more clear when you look at sales figures by price range. sales of homes under 100k were down across the nation but down 47% out west your over year where investors have really cleaned out the market.
     
     
     
     
    9--Defining a ‘qualified’ mortgage, Mark Zandi, WA Post
     
     
    The study finds Dodd-Frank’s ban on loans with the highest risk of default—for example, those with prepayment penalties or no income documentation—fixes the bad underwriting that caused the housing crisis. Adding a down-payment threshold set by the federal government would do little to reduce defaults relative to the large number of creditworthy home buyers it would push from the market. These findings are particularly significant because the stalled housing market has been a key obstacle to economic recovery
     
     

    Friday, October 19, 2012

    Today's links

    1--Housing’s Bounce Off the Bottom May Not Signal Boom Times, Firedog Lake

    One potential pitfall could be all the private loan modifications granted by the major servicers. These are modifications performed outside of HAMP, which have notoriously higher levels of default. Well over 40% of private mods granted since the third quarter of 2009 are now back in default. I’ve heard about some of these modifications leading to higher mortgage payments. These won’t all default in one fell swoop like everyone feared with rate recasts, but we could slowly see more and more decay as they tick off. Short sales have basically replaced foreclosures, and the private investors scooping up homes in serious default could set a floor under that side of the market and help prices. But that’s a bubble waiting to happen.

    2--Some Smart Money is Already Exiting the Single Family Rental Landgrab, naked capitalism

    Reuters describes how one of the funds that was first to get on the “buy single family homes out of foreclosure and rent them” bandwagon has decided to exit

    3--Wall Street CEOs Up Pressure for Grand Bargain in the Lame Duck Session, Firedog Lake http://fdlaction.firedoglake.com/2012/10/18/wall-street-ceos-up-pressure-for-grand-bargain-in-the-lame-duck-session/

    4--Housing starts boosted by FHA loans, Sober Look

    5--Today’s investors have pulled $440 billion from U.S. equity mutual funds since 2008, Bloomberg

    ... and sent trading to the lowest levels in at least four years, retrenching after the worst financial crisis since the Great Depression and the May 2010 stock crash, data compiled by Bloomberg and the Investment Company Institute show.

    6--Say "Good bye" to SEC's Mary Schapiro, Bloomberg

    the SEC should have focused on fixes that could prevent another crisis, such as the Dodd-Frank mandate that the agency remove references to credit-rating companies from its rule book.

    ‘Bold Action’

    The companies had been lambasted for giving top ratings to securities that turned out to be toxic, helping to fuel the crisis. Excluding them would protect investors “more than any other action the commission has taken since Congress took bold action to give the SEC formal oversight of credit-rating agencies,” Gallagher said.....
     In April, Obama signed the bipartisan Jumpstart Our Business Startups Act, which aims to spur investment in new firms. Among other things, it allows closely held companies to sell shares over the Internet via “crowdfunding” and lets hedge funds advertise for investors. After the House passed its version and the Senate was about to take it up, Schapiro wrote a March 12 letter to lawmakers asking that the bill be “modified to improve investor protections.”

    ‘Lowest Point’

    Arthur Levitt, a former SEC chairman who said he applauds Schapiro for pulling the agency back from the brink in 2009, was disappointed by her response to the bill. He said the agency’s failure to aggressively oppose the JOBS Act “was the lowest point” of her tenure.
    “I’m glad that Mary wrote a letter, but it was far less firepower than was required to fight legislation more harmful to investor interests than any in my memory,” said Levitt, who is a board member of Bloomberg LP, parent of Bloomberg News.
    The Washington Post had a nice piece on the potential impact of the recovery of the housing market on the economy. The piece reasonably assumes that construction returns to its long-term trend share of GDP, rather than getting back to its bubble levels of the last decade. In this case it will make a substantial contribution to the recovery, although it still will not possible to return to full employment without large budget deficits, unless there is a substantial reduction in the size of the trade deficit.


    Wednesday, October 17, 2012

    Today's links

    1--Family debt worse than expected; housing bubble burst feared, calgary herald

    Canadian households are even more in debt than anyone imagined, according to a revised Statistics Canada calculation that gives a more accurate picture of family finances.
    The revisions place household credit market debt in the second quarter at 163 per cent of disposable income, well above the previously reported 152 per cent, although the two levels are no longer a direct comparison.
    The new numbers remove non-profit institutions from the household category, giving a more accurate accounting of family finances.
    The revision shows debt growth over the last decade that looks “eerily similar to the U.S. experience, just before their dramatic housing bust,” said David Madani, an analyst with Capital Economics.
    “Overall, this supports our bearish view that Canada’s housing boom is unsustainable and the eventual correction, which we think is already underway, is likely to have a material negative implications for growth,” he said

    2--Puncturing the Housing Optimism Bubble, firedog lake

    The housing bulls have really started to run wild now. One of them planted this rose-colored story in Bloomberg arguing that consumer deleveraging points to happy times ahead for the economy. The only problem is that the deleveraging comes from defaults rather than any paying down of debts. And these defaults are destructive for an economy, not a sign of hope.

    It’s a similar story with some of the other housing fundamentals. Cullen Roche rightly points out that the housing recovery, when viewed over a longer time horizon, looks completely pathetic, and the bulls are being overcome with recency bias. There’s upward movement over the past two years off an incredibly low bottom, and viewed against the historical average it barely looks like movement at all....

    You can call this a “recovery” if you want, but if there are 400,000 less homes for sale, it follows that, amid constrained supply, any increase in demand will cause prices to rise. The demand increase is coming from institutional investors scooping up homes to rent out. Low mortgage rates haven’t hurt, assuredly, but most of the mortgage activity is coming from refinancing. The investors pay cash for their homes...
    People aren’t selling their homes to “step up” into new ones because they cannot come up with the down payment. Banks are keeping other homes in their inventory off the market to structure supply. So prices, which are artificially derived at this point, does not necessarily account for sales. In fact, as we move out of summer, we are likely to see a sales drop. Sales in California fell 16% month-over-month in September, and it was even a 2.7% drop year-over-year.

    3--Fed's Beige Book, credit flat, Bloomberg

    Overall loan demand increased slightly on net since the last Beige Book report. New York, Philadelphia, Cleveland, Richmond, Atlanta, St. Louis, and San Francisco reported stronger loan demand on balance, while Kansas City and Dallas reported flat demand and Chicago reported somewhat weaker demand. ..., New York noted some tightening for consumer loans and residential mortgages, while Richmond and Chicago reported some easing for commercial and industrial loans. Still, loans remained difficult to obtain for many small businesses in the Cleveland, Richmond, and Chicago Districts

    4--Housing Sales Are Back to Trend, CEPR

    Both the NYT and USA Today have convinced themselves that house sales are well below their trend level, with the latter telling us that a 5.5 million annual sales rate of existing homes considered healthy. In fact, we are pretty much back to trend levels of sales. In the mid-90s before the bubble began to distort the market, sales averaged about 3.5 million a year. A simple adjustment for the 15 percent population growth over this period would imply an annual sales rate of 4 million existing homes. That is somewhat below the current 4.5 million sales rate.
    The gap between the current sales rate and the trend more than makes up for the continued weakness in new home sales. So, what are these folks talking about?

    5--Property Flippers Are Back as Housing’s New Middle Men, CNBC

    6--Housing Starts increased sharply to 872 thousand SAAR in September, cal risk

    From the Census Bureau: Permits, Starts and Completions
    Housing Starts:
    Privately-owned housing starts in September were at a seasonally adjusted annual rate of 872,000. This is 15.0 percent above the revised August estimate of 758,000 and is 34.8 percent above the September 2011 rate of 647,000
    Total starts are up about 80% from the bottom start rate, and single family starts are up 70% from the low.

    7--Home loan hiatus, Big Picture chart

    8--Obama's Good War Turns Bad--Losing Their Grip in Afghanistan, counterpunch

    9--What would make a strong foundation for a recovery? , OC Housing

    First, a housing recovery should be built on solid job growth — something that isn’t happening. Job growth of high-paying jobs would translate to more mortgage originations and purchases by owner occupants. Since job growth stimulating owner-occupant purchases should be the foundation of a recovery — and since that isn’t happening — the recovery is being built on a shaky foundation. The recent price rally — call it a housing recovery if you wish — is built on two things: 1) lender restricted inventory, and 2) low interest rates. If either of those two factors change, the housing recovery could easily be snuffed out. After all, the real demand behind a recovery simply isn’t there yet...

    If the federal reserve cannot keep mortgage interest rates low with its guaranteed $40B monthly purchase program, then I will re-evaluate my opinion on future house prices. My belief today is that mortgage interest rates will stay low for the next two or three years at least. If that assessment is wrong, affordability could plummet, and house prices will plummet along with affordability. The reason prices are rising right now isn’t just because inventories are tight. Buyers have the capacity to raise their bids. Once interest rates go up, buyers won’t have this ability, and the rally will stop dead in its tracks.

    10--Apartment Bubble Inflating Fast, Realty Check

    Housing construction numbers for September were “blowout” and “smashed consensus,” according to analysts who follow the sector. Single family starts rose 11 percent from August and are up nearly 43 percent from a year ago. This from the depths of the housing recession. ...

    Peter Boockvar of Miller Tabak: “At a starts level of 872,000, it comes close to matching the level of starts at the depths of the 1991 recession when starts fell to 798,000 and before that, starts bottomed at 837,000 in the recession of 1981. This of course is not adjusted for population growth where we had about 250 million people in 1991 and 225 million in 1981 versus 310 million today.”

    The bottom line is we’re up, but we are up from the very bottom, so these big single family starts percentage jumps don’t mean that we are anywhere close to even normal times. What’s driving the starts? Demand, plain and simple. 
     
     
     
    In the aftermath of September 2008 and the onset of the global financial crisis, the international meetings of the major capitalist powers were characterised by a degree of unanimity, at least on the surface. All were agreed that vast amounts of money had to be pumped into the financial system to prevent a collapse.
    No action would be taken against the banks and financial institutions whose speculative activities had sparked the crisis. In fact they would be rewarded with trillions of dollars in bailout money.
    This was accompanied by claims that such action was necessary to prevent a global disaster. Government leaders, it was asserted, had learned the lessons of the 1930s. There would be no return to the conflicts of that era, and action would be taken to ensure there was no repeat of the experiences of the Great Depression.
    Today, it is a very different picture. The world economy is moving deeper into recession, and the conditions for a new crisis are being created because of the ever-increasing commitment of central banks around the world to propping up international financial markets.

    14--More contaminated drugs linked to US meningitis outbreak, WSWS

    15--Biderman on CNBC: the new bubble is securitized credit, Trim Tabs video