Sunday, March 31, 2013

Today's links

1---The Five Ways Deflation Has Already Taken Hold, Bloomberg

2---Iceland Indicts Bankers Over Financial Crisis, american banker

3---The Tequila Crisis: The Prelude To Europe’s Economic Storm, Testosterone Pit

Even the most blindly trusting and optimistic of Europeans are finally beginning to see through the Troika’s grandmotherly countenance to its wolfish core. By contrast, to many Latin Americans, the international banking institutions’ lupine nature is all too familiar. Through painful experience, they have learned that when the real men in black come calling, bad things tend to happen.
During the lost decade of the 80s and the tumultuous first half of the 90s, many Latin American economies, including the now rising global superpower Brazil, were torn asunder and bled dry by a fatal cocktail of political ineptitude and corruption, and financial fraud and abuse – all of it facilitated and overseen by the IMF, now one of the leading protagonists in the Troika’s asset-stripping pillage of Europe....
Even today, 19 years on from the onset of the crisis, the country continues to pay its pound of flesh for the toxic debt generated during the “miracle years.” According to recent estimates, between 1976 and 2000, the buying power of the country’s average minimum salary fell by a staggering 74 percent, and has since risen by a pitiful 0.5 percent. As in post-crisis Argentina, the country’s middle class has been decimated. And what little remains of it is on the tab for the more than 3 billion dollars of annual interest payments on the country’s debt.
For the big U.S. banks that helped fuel the Mexican miracle, the last 19 years have been somewhat kinder. Following their recent takedown of the U.S. economy in the sub-prime debacle, they are quite literally “too big to fail” and have their sights set on much larger prey.
It seems, with the benefit of hindsight, that the Mexican Miracle and Tequila Crisis were merely a test run for the end game now playing out in Europe. The question is: will the Europeans play along? Contributed by Don Quijones, of

4---Euro: Requiem or Renewal?, The Big Picture
In the Cyprus affair, we observe a defeat of the concept behind the Eurozone and the original European Union. It took half a century to create the European Union after WWII. The driving force was what the French call a “rapprochement” between formerly antagonistic parties. To put it simply, the Germans and French decided to stop killing each other after a thousand years of war. An economic union seemed the right way to go about attaining peace and prosperity. After centuries of destructive inflation outcomes, they realized credible money was absolutely necessary for this peaceful outcome to succeed....
Euro sickness is coming to a head. Capital controls are the death of a country, currency, and economy. They create depressions. They are not temporary in the true meaning of a short-term action. Iceland still has capital controls five years after its banking shock. Nearly all countries in Europe are suffering a spiraling down of their financial structures. The 17-member Eurozone’s overall growth rate in 2013 will be near zero. The 27-member European Union will not be much better.
Europe’s leaders face a fundamental question regarding the euro. Do they want a requiem, in which case all they have to do is keep doing what they are doing, or do they want a renewal, in which case behavior must change credibly, immediately and decisively?
We are going to find out soon enough. Markets will force the requiem if political forces do not deliver the renewal.
For investors, this has become an easy decision. You can either bet on the renewal, which we are not ready to do, or you can bet on the requiem, which means capital moves out of the Eurozone.

Saturday, March 30, 2013

Today's links

...while incomes did rebound after the plunge in January, the modest increase represented a rise in the personal savings rate to just 2.6% - the second lowest monthly savings print since 2007, excluding only the abysmal January 2.2% print. In other words, there is hardly much if any new room for additional spending with the savings rate nearly at record lows, and with US consumer continuing to reduce their outstanding revolving credit, the Q1 retail sales miracle will hardly be repeated in future months as US consumers seek to rebuild some cash buffer.
For those claiming there is something called a "recovery" underway, perhaps they can point out just where on this chart of Real Disposable Income per capita one can find said recovery.

1.) The “Monsanto Protection Act” effectively bars federal courts from being able to halt the sale or planting of controversial genetically modified (aka GMO) or genetically engineered (GE) seeds, no matter what health issues may arise concerning GMOs in the future
3---Wall Street's role in the Cyprus crisis, counterpunch

The ‘excess savings’ view of global investment hides the role of Wall Street in the creation and distribution of credit. For example, Deutsche Bank, the large German bank, was one of the largest creators and distributors of garbage financial products on Wall Street in the 2000s. So banks both create money through credit finance and the financial products to be bought with the money thus created—literally a license to print money. And both the creation of credit and the production and distribution of garbage financial products pay bankers extremely well while coincidentally increasing the risk of economic catastrophe through cash-flow leverage now distributed globally....

Put another way, what better system could be conceived to loot and plunder the globe than that where bankers get to create credit and also the financial products representing claims on ‘real’ assets that can be bought with it? Currently hedge funds in the U.S. are buying bulk houses at pennies on the dollar because private (bank) credit was used to inflate house prices in a credit-fueled boom that went bust. Foreclosed upon home ‘owners’ still owe tens of billions to the banks even though their houses are long gone and the bulk house purchases will be leveraged (using bank credit) to cash the hedge fund investors out and residual value will be sold to shadow banks that have created ‘cash-flow’ economics that depend more on low funding costs and continuing credit expansion than on the values of the underlying houses. And this same dynamic is playing out with ‘state’ assets across peripheral Europe as economies are crashed by bankers (with the help of Central Banks and state actors like Angela Merkel and Barack Obama) and assets are purchased at pennies on the dollar against captive cash flows (think public water and power systems)......

Finance capitalism is fatally flawed in theory and in practice. Its ultimate product is that which is before us: a global plutocracy dependent on state capture, power and control to plunder and loot what will become, by necessity, increasingly resistant populations. The post-War ‘moderation’ cited by mainstream economists worked to the extent it did by limiting private debt creation. However, the base imperative of finance capitalism today is infinitely expanding (private) debt—it is the source of its political and economic power. Those in the U.S. who remain in the Democrat / Republican divide are blind to where real power lies. Events in Cyprus have provided a glimpse for those who care to see. 

4---Destruction of Cyprus Economy Proceeding Ahead of Schedule , naked capitalism

When I first heard about the Cyprus ritual execution bailout, I had thought that the widespread predictions that the island nation’s economy would contract by 20% to 30% over the next two years were off base.
I thought it would happen much faster, on the order of two to three months. An estimated 45% (mind you, 45%!) of the economy is banking, and almost all of that international banking. So if you generously assume 200% of the 900% of GDP was bona fide domestic assets (remember you have a lot of retirees), the other 7/9 goes poof. And that’s before you get to the fact that a lot of the services provided to foreign customers (the higher-end accounting and legal services) will have no future in a purely domestic banking business. So assume 90% of that 45% disappears in short order.

5---North Korea in ‘State of War’ With South Korea,

The U.S. housing market will see no surge at the start of spring, as fewer buyers signed contracts to purchase existing homes in February. An industry index of so-called pending home sales fell 0.4 percent from January but is up 8.4 percent from February of 2012. While the number of for-sale listings increased more than the seasonal norm, Realtors still say a lack of supply is keeping many potential buyers from desired deals. Pending home sales are a one to two month forward indicator of closed sales.

7--Record Food stamp usage in US, WSWS 

8---US provokes N Korea in senseless standoff, info clearinghouse

9---Successful loan modifications require increasing borrower entitlements, oc housing news

10---Cyprus and the deepening EZ depression, marketwatch

The Cyprus debacle will deepen the depression now starting to grip the European economy. This is no longer a financial crisis — it is an economic crisis. And the collapse of Cyprus will make that a whole lot worse.

The so-called rescue will push one more country into a catastrophic recession. It will provoke an outflow of global funds from the euro-zone. And it will encourage small businesses and depositors to hoard cash. A modern economy can’t function without a healthy banking system. And after Cyprus, no bank in the euro zone can be regarded as safe anymore.....
Markets might rally on the deal, a sudden Cypriot exit would have been a traumatic event. But the so-called rescue is still a disaster of the euro-zone economy. It was already shrinking. By the autumn it will be in a full-scale depression. And that means the euro itself and European equity markets will be falling for the rest of this year

Bernard Madoff, who admitted in 2009 to running a multibillion-dollar Ponzi scheme, told media outlets this week that the government-appointed trustee for his firm’s investors is refusing to act on evidence showing the complicity of major banks in his activities.
“Although I have offered the bankruptcy trustee the information that I possessed that would demonstrate in detail the complicit behavior of banks like JPMorgan, Bank of NY, HSBC, Citicorp and other, the trustee seems unwilling to act on my offer,” Madoff said in an email to Fox Business and MarketWatch.
“Therefore, I am offering this information to the appropriate governmental committees in the hope that this information will prove helpful in future regulation of the appropriate institutions,” he added.

The increasing chasm between ordinary Americans and the elite that is celebrating stock market records is not the outcome merely of impersonal economic processes. The growth of social inequality since the 2008 financial crash is the product of definite policies pursued first under Bush and then under the Obama administration. The political establishment has pursued a bipartisan policy of class warfare against the working class while bailing out Wall Street and assisting its continued plundering of social resources.
The US Federal Reserve is pumping $85 billion a month in virtually free money into the financial system, fueling the stock market boom. This is more money in a month than the $76.6 billion the federal government spent all of last year to provide SNAP benefits to 47.8 million impoverished Americans.
Despite the explosive growth of the food stamp rolls and the obvious need for more funding for SNAP, even the minimal expansion of the program under the Obama administration’s 2009 stimulus bill is set to expire on October 31, cutting food stamp benefits by about $8 per month per recipient.

Thursday, March 28, 2013

Today's links

1---Central bank balance sheet explosion, Big Picture

Slide 13 lists the total assets of the major central banks. Those are the Federal Reserve, European Central Bank, Bank of England, Bank of Japan, and Swiss National Bank. We have added the Swiss National Bank since Switzerland now practices a policy maintaining a pegged floor in the exchange rate between the Swiss franc and the euro. Essentially, these central banks started pre-crisis with about $3.5 trillion in total assets, in US dollar terms. Their assets now exceed $10 trillion and are growing. We have broken out the individual central banks for tracking purposes.
Slides 20 and 21 depict the assets and liabilities of the Bank of Japan. Note that Japan is the only major country that has experienced extraction from quantitative easing. That happened in 2006. At the time, the Japanese quarter-end extraction shocked world markets quite seriously. This is the only case in modern history where a large extraction at quarter-end occurred. We have noted it for both the assets side and liabilities side in slides 20 and 21.

The conclusion of our remarks in Dubai outlined the various factors that world markets and economies confront as this immense expansion of central bank balance sheets, along with massive liquidity injections, runs its course. We do not know how long this game of monetary quantitative easing will continue in the world. We do not know when it will stabilize. We do not know what will happen after that period, and we do not know how extraction will occur. What we do know is that world monetary affairs have never been in a situation like this before.

2--China's shadow bank problem, Bloomberg

Shadow lending flourishes in China because an estimated 97 percent of the nation’s 42 million small businesses can’t get bank loans, and savers are seeking higher returns than lenders pay for deposits. UBS AG estimates the size of the industry, including private lending, banks’ off-balance-sheet vehicles and trusts, at $3.35 trillion, or 45 percent of gross domestic product. A study by Zhou of the Wenzhou association and a group of academic researchers put the amount of private lending among individuals at about 3.7 trillion yuan ($596 billion).

3----RealtyTrac: Foreclosure activity rising in 2013, Housingwire

4---Deep Freeze: Home Sales to Barely Budge in Spring, CNBC

The U.S. housing market will see no surge at the start of spring, as fewer buyers signed contracts to purchase existing homes in February. An industry index of so-called pending home sales fell 0.4 percent from January but is up 8.4 percent from February of 2012. While the number of for-sale listings increased more than the seasonal norm, Realtors still say a lack of supply is keeping many potential buyers from desired deals. Pending home sales are a one to two month forward indicator of closed sales. ...

Sales of newly built homes fell nearly five percent in February, according to the U.S. Department of Commerce. Inventories did rise, but only slightly, as the nation's home builders struggle with labor and land shortages, as well as higher costs for materials.
   better sign for March, after two weeks of declines, mortgage applications to purchase a home jumped 7 percent during the past week, according to the Mortgage Bankers Association. This as interest rates fell slightly, due to concerns over the banking crisis in Cyprus.
"The rebound in mortgage applications is a small piece of a brighter housing outlook," says Bob Walters, chief economist for Quicken Loans. "Interest rates are still at record lows despite their upward trend, and consumers are taking advantage of record home affordability. Look for more buyers to enter the market this spring and a more robust housing recovery to occur."

5---International capital flows during crises: Gross matters, VOX

At the prudential level, policymakers might need to monitor and perhaps regulate ex ante the separate behaviour of domestic and foreign investors. Fashionable tools include macroprudential rules and capital controls. During good times, as financial globalisation deepens, authorities might want to encourage that foreign capital inflows are channelled to assets that can cushion eventual negative shocks. In particular, capital inflows intermediated by the banking system might prove particularly dangerous given the susceptibility of banks to runs. Flows into short-term debt might also generate fragility due to the rollover risk. On the other hand, equity and direct investment seem safer ways to channel foreign-capital inflows. On the asset side, countries might be encouraged to keep accumulating large amounts of reserves to be able to withstand shocks. In fact, this type of international financial integration seems to be the strategy that middle-income countries have followed during the 2000s, which might explain their resilience during the global financial crisis.

6--Speaking of inequality, angry bear

Travis Waldron at Think Progress pointed out this excellent article by David Cay Johnston. It dovetails well with my last post, which showed the fall of individual real wages and their failure to regain their peak fully 40 years after it was reached.

Johnston writes:
Incomes and tax revenues have grown from 2009 to 2011 as the economy recovered, but an astonishing 149 percent of the increased income went to the top 10 percent of earners.
If you wonder how that can happen, the answer is simple: Incomes fell for the bottom 90 percent. 7---Plans to vastly expand drones in US, wsws 8---The trade unions and Michigan’s “right to work” law, wsws   Michigan’s “right to work” law, passed in December, goes into effect today, making the state the 24th to prohibit contracts that require workers to pay union dues or fees as a condition of employment.
As the World Socialist Web Site explained when it was signed, the law is reactionary and regressive, its principal aim being to undermine the ability of workers to organize collectively. The main backers of the law and similar measures in other states are sections of the corporate and financial elite that see them as means for intensifying the exploitation of the working class

9---China hard landing fears resurface in survey, emerging markets

Worries that China's economy will slow down more abruptly than forecast have returned on the agenda, a fund managers survey shows.

The survey, by BofA Merrill Lynch Global Research, showed that expectations for growth in the Chinese economy dropped sharply to 14% of participants from 60% in a previous poll.
This is the lowest level since October last year and represents one of the biggest monthly falls in the reading in the survey's history.

A total of 198 fund managers, managing $578 billion, participated in the global survey, which was carried out by the BofA Merrill Lynch Global Research team between March 8 and March 14.
In a similar survey carried out at the beginning of February, China was investors' favourite market.
The analysts said that the "significantly increased" fears of a hard landing in China are reflected in investors' moves out of stocks in emerging markets and into those of developed ones, especially the US and Japan.

"Relative US economic outperformance on the back of the housing market’s ongoing improvement and the energy independence story will lead a secular uptrend in the dollar," Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research, said in a statement.
"US equities' leadership in the 'Great Rotation' suggests developed market equities are the likeliest winner in this scenario," he added.
Optimism about emerging markets equities in general is fading, with a net 34% of global fund managers reporting an overweight position in this asset class, down from 43% in last month's survey. 

Wednesday, March 27, 2013

Today's links

1---Income Inequality, tax analysts

Incomes and tax revenues have grown from 2009 to 2011 as the economy recovered, but an astonishing 149 percent of the increased income went to the top 10 percent of earners.

If you wonder how that can happen, the answer is simple: Incomes fell for the bottom 90 percent. The rich really are getting richer while the vast majority is getting poorer. These facts should be at the center of any debate about changes in tax law and spending with the March 1 budget sequestration deadline just four days off. The income growth and shrinkage figures come from analysis of the latest IRS data by economists Emmanuel Saez and Thomas Piketty, who have won acclaim for their studies of worldwide income patterns over the last century. In 2011 entry into the top 10 percent, where all the gains took place, required an adjusted gross income of at least $110,651. The top 1 percent started at $366,623. The top 1 percent enjoyed 81 percent of all the increased income since 2009. Just over half of the gains went to the top one-tenth of 1 percent, and 39 percent of the gains went to the top 1 percent of the top 1 percent. Ponder that last fact for a moment -- the top 1 percent of the top 1 percent, those making at least $7.97 million in 2011, enjoyed 39 percent of all the income gains in America. In a nation of 158.4 million households, just 15,837 of them received 39 cents out of every dollar of increased income. That extreme concentration, however, is far from the most jaw-dropping figure that can be distilled from the new Saez-Piketty analysis. That requires a long-term comparison of those at or near the top with the bottom 90 percent. In 2011 the average AGI of the vast majority fell to $30,437 per taxpayer, its lowest level since 1966 when measured in 2011 dollars. The vast majority averaged a mere $59 more in 2011 than in 1966. For the top 10 percent, by the same measures, average income rose by $116,071 to $254,864, an increase of 84 percent over 1966. Plot those numbers on a chart, with one inch for $59, and the top 10 percent's line would extend more than 163 feet. Now compare the vast majority's $59 with the top 1 percent, and that line extends for 884 feet. The top 1 percent of the top 1 percent, whose 2011 average income of $23.7 million was $18.4 million more per taxpayer than in 1966, would require a line nearly five miles long. ....

The median wage has been stuck since 1999 at a bit more than $500 per week in real terms and job growth has lagged far beyond population growth. But capital gains and dividends have soared, a new Congressional Research Service study shows. And, of course, the rich get most of that income. Thomas Hungerford concluded:

    By far, the largest contributor to increasing income inequality (regardless of income inequality measure) was changes in income from capital gains and dividends. Capital gains and dividends were less equally distributed in 1991 than in 2006. . . . Tax policy may have also have had an indirect effect on rising income inequality, especially between 2001 and 2006. The reduction in the tax rate on long-term capital gains and qualified dividends may have led to the increased importance of this source in after-tax income.2

The Saez-Piketty analysis shows the concentration of growth at the very top increasing. That is bad for tax revenue and bad for social stability. The drop in incomes among the vast majority holds back economic growth, because there is just not enough aggregate demand to support creating enough new jobs to keep up with population growth.
And who was hit hardest by the new federal taxes that took effect this year? The vast majority. Ending the temporary 2 percentage point cut in the visible half of the Social Security tax has, predictably, dampened spending. Wal-Mart suffered very weak sales in early February, e-mails obtained by Bloomberg revealed.3 That is a predictable result for any retailer whose customer base is downscale...

Ponder again that ratio in income growth after 45 years between the vast majority and the top 1 percent of the top 1 percent -- $59 more to $18.7 million more. For each extra dollar of annual income going to each household in the vast majority, an extra $311,233 went to households in the top 1 percent of the top 1 percent

2--Americans Widely Back Government Job Creation Proposals, Gallup

Majority of Party Groups Favor Each Jobs Proposal
A majority of Democrats, Republicans, and independents support each of the three job creation proposals tested in the poll. Republicans are much more supportive of business tax breaks than the new job programs, and Democrats are more likely to favor the job creation programs, while independents show roughly equal support for all three.
Support for Job Creation Proposals, by Political Party

3---Free Trade and Unrestricted Capital Flow: How Billionaires Get Rich and Destroy the Rest of Us, naked capitalism

Keep in mind, the purpose of unrestricted “free trade” is to advantage the holders of capital over everyone else on the planet. Great wealth insulates these men and women from crises, so even global economic crisis is just the externalized price (that we pay) for their wealth extraction enterprise — just like a burdened health care system is the externalized price (that we pay) for wealth extraction by billionaire owners of tobacco companies from the constant stream of lung cancer patients.

What’s “a world in constant crisis” to them? Just the cost of doing business. Nothing personal. It’s just business

4---U.S. auto sales could rise 8 pct in March -research firms, Reuters

U.S. auto sales in March are expected to rise 8 percent and the annual sales pace should top 15 million for the fifth straight month as consumers shake off worries about the economy, according to research firms J.D. Power and Associates and LMC Automotive.

Sales of new cars and trucks in March are expected to rise to 1,465,100 vehicles, while the annual sales pace is forecast to hit 15.3 million vehicles, J.D. Power and LMC said in a joint report released on Thursday. Since November, the annual rate has ranged from 15.3 million to 15.5 million.

Auto sales are an early indicator each month of economic health. The industry has so far proven stronger than the overall U.S. economy as the record high age of cars and trucks on the road has reached more than 11 years, and easier availability of credit have pushed consumers into the market.

"We expect the economic environment to improve throughout 2013, as the likelihood of a dark cloud slowing the recovery pace diminishes," LMC senior vice president Jeff Schuster said in a statement. "Consumers do not appear phased by headwinds from Washington, as growth in auto sales are outperforming earlier expectations."

5---Cyprus should leave the euro. Now., NYT

The reason is straightforward: staying in the euro means an incredibly severe depression, which will last for many years while Cyprus tries to build a new export sector. Leaving the euro, and letting the new currency fall sharply, would greatly accelerate that rebuilding.

If you look at Cyprus’s trade profile, you see just how much damage the country is about to sustain. This is a highly open economy with just two major exports, banking services and tourism — and one of them just disappeared. This would lead to a severe slump on its own. On top of that, the troika is demanding major new austerity, even though the country supposedly has rough primary (non-interest) budget balance. I wouldn’t be surprised to see a 20 percent fall in real GDP.

What’s the path forward? Cyprus needs to have a tourist boom, plus a rapid growth of other exports — my guess would be agriculture as a driver, although I don’t know much about it. The obvious way to get there is through a large devaluation; yes, in the end this probably does come down to cheap deals that attract lots of British package tours.

Getting to the same point by cutting nominal wages would take much longer and inflict much more human and economic damage.

6----The "disability problem" myth, CEPR

While there have been problems with the disability program for some time, these problems changed qualitatively as a result of the downturn. Disability payments actually had been somewhat below projections until the downturn. The downturn following the collapse of the housing bubble then sent costs soaring. The Trustees projections show that this rise is temporary and projected to fall back once the economy returns to something resembling full employment, as shown below.
                            Social Security Trustees Reports, 1996 and 2012.
You can get a somewhat fuller discussion of this point in my earlier blogpost. Anyhow, before reporters just pick up the This American Life piece and start yapping about how disability costs have exploded out of control they should take a moment and look at the projections in the Trustees report.
The reality is that the explosion in costs is just one more spin-off of the disastrous economic policy crafted in Washington. We have not suddenly become a nation of slackers or unemployable deadbeats.

7---Consumers start tightening their belts, CEPR

The Conference Board's index of consumer confidence fell in March. What is noteworthy for those following the economy is that the current conditions index dropped by 3.5 points to 57.9. This component is the one that actually tracks current consumption reasonably closely, so it is giving us information about the economy.

By contrast the future expectations components is highly erratic and bears little relationship to actual consumption patterns. Reporters generally don't make a point of distinguishing between these two components. This can lead them to misinform the public about the economy.

For example there were many stories last fall highlighting falls in the index based on the future expectations index. These drops were undoubtedly attributable to media accounts warning of the end of the world if we went off the "fiscal cliff." As we now know, consumption spending held up just fine through the fall.

The recent drop in the current conditions index however should be taken as a serious warning that consumers may be tightening their belts. That would not be a surprising response to the ending of the payroll tax cut, plus some amount of layoffs and cutbacks associated with the sequester.
This is just one report among many, but it does suggest that the recovery optimists singing about having finally turned the corner may be wrong.

8---Down payment rule could torpedo housing industry, groups warn, The Hill
9---Big Banks Offer Payday Loans At 300 Percent Interest: Study, Huffington Post

10---Student loan write-offs hit $3 billion in first two months of year, Reuters

11---No Money Down Mortgages Stage a Comeback, credit union times

12----WALLISON AND PINTO: New Qualified Mortgage rule setting us up for another meltdown Government housing loan policies doomed to fail, Washington Times

13---Customers Flee Wal-Mart Empty Shelves for Target, Costco, Bloomberg

14---FHA: The serious delinquency rate was 9.5 percent in January, unchanged from December but up from 9.8 percent in January 2012, loan rate update

FHA Streamline loans accounted for 81.3 percent of all refiances.

The average FICO score for a homebuyer securing an FHA loan in January was 695, the same as in December and down from 696 a year ago. For refinanced loans, the average FICO score in January was 701, also the same as the previous month but down from 706 a year earlier.
The number of seriously delinquent loans insured by the FHA increased by 0.5 percent from December to January and was 0.6 percent higher than a year ago.
The number of loans that were 90 days or more past due increased by 3,451 in January, bringing the total number of seriously delinquent loans in the FHA’s portfolio to 738,109. In the last year, the number of seriously delinquent loans has increased by 4,265.
The serious delinquency rate was 9.5 percent in January, unchanged from December but up from 9.8 percent in January 2012.

At the end of January, the FHA had 7,780,073 insured single-family mortgages in its portfolio with an amortized balance of $1.094 trillion.
The number of loans insured by the FHA has increased by 3.6 percent in the last year while the amortized balance has increased by 4.0 percent.

(Streamline means --- The FHA streamline refinance is best defined as follows:
  • The refinance of an existing FHA loan with limited documentation and minimal underwriting qualifications.
     FHA's stance is if the homeowner is current on their existing mortgage (one that FHA is already insuring) and they are able to refinance to a lower interest rate and lower payments, without increasing the loan amount by more than the original  amount, then why not make it as easy as possible for the borrower to qualify and limit the documents needed.
     This is exactly what FHA offers with it's FHA streamline refinance. A means to refinance your mortgage without all of the paperwork, underwriting qualifications, appraisal, or time normally necessary when refinancing a home loan

15---Cyprus faces deep recession, high unemployment after bank bailout, wsws

On Tuesday, Cyprus’s central bank confirmed that the new agreement, imposed in defiance of public opinion without so much as a vote in parliament, will see a 40 percent levy on deposits above €100,000 held in the Bank of Cyprus, in addition to wiping out €4.2 billion of deposits at Laiki. This is to be accompanied by capital controls, including a weekly limit on cash withdrawals and curbs on the export of euros....

As the BBC’s Robert Peston commented, “The rescue of Cyprus won't feel like one to its people.” It amounted, he continued, to “An economy that will be starved of credit, and will therefore shrink rapidly and very painfully for citizens,” and whose “main industry, offshore banking, is being shut.”...

Nicholas Papadopolous, chairman of the Cypriot parliament’s finance committee, bluntly admitted: “We are heading for a deep recession, high unemployment.”
The European bourgeoisie, which has turned the entire continent into an austerity zone on behalf of finance capital, is now looting another defenceless country. ....

Deposit seizures and limitations on the free movement of capital meant that the EU “has now made it official policy, under certain circumstances, to encourage member states to seize depositors' assets to pay for the stabilization of financial institutions.”
“If Russian deposits can be seized in Nicosia, why not American deposits in Luxembourg?” it asked.
Such fears were strengthened by reports that the Spanish government is to impose losses of up to 60 percent on investors at five nationalised banks. In addition, a European Commission spokesperson confirmed Tuesday that large uninsured depositors could be “bailed-in” to future bank rescues, under draft legislation being prepared by the EU.


Tuesday, March 26, 2013

Today's links

1--Special entry: Gamechanger:  Cyprus to shape future euro bank rescues: Eurogroup head, Reuters
(The stupidity continues apace. Truly unbelievable)

A rescue program agreed for Cyprus will serve as a model for dealing with future euro zone banking crises and other countries will have to restructure their banking sectors, the head of the region's finance ministers said.

The approach would mark a radical departure for euro zone policy after three years of crisis in which taxpayers across the region have effectively been on the hook for resolving problem banks and indebted governments via multiple rescue programs.

"What we've done last night is what I call pushing back the risks," Dutch Finance Minister Jeroen Dijsselbloem, who heads the Eurogroup of euro zone finance ministers, told Reuters and the Financial Times on Monday, hours after the deal was struck.

"If there is a risk in a bank, our first question should be 'Okay, what are you in the bank going to do about that? What can you do to recapitalize yourself?'. If the bank can't do it, then we'll talk to the shareholders and the bondholders, we'll ask them to contribute in recapitalizing the bank, and if necessary the uninsured deposit holders," he said.

After 12 hours of talks with the EU and IMF, Cyprus agreed to shut down its second largest bank, with insured deposits - those below 100,000 euros - moved to the Bank of Cyprus, the country's largest lender. Uninsured deposits, those accounts with more than 100,000 euros, face losses of 4.2 billion euros.

Uninsured depositors in the Bank of Cyprus will have their accounts frozen while the bank is restructured and recapitalized. Any capital that is needed to strengthen the bank will be drawn from accounts above 100,000 euros.

The agreement is what is known as a "bail-in", with shareholders and bondholders in banks forced to bear the costs of the restructuring first, followed by uninsured depositors. Under EU rules, deposits up to 100,000 euros are guaranteed.

Three years of governments and taxpayers bearing the costs and providing the back stop, had to stop, Dijsselbloem said. Recent financial market calm meant now was the time to make the change, although he conceded there was some concern that it could unsettle markets again.

"If we want to have a healthy, sound financial sector, the only way is to say, 'Look, there where you take on the risks, you must deal with them, and if you can't deal with them, then you shouldn't have taken them on,'" he said.

"The consequences may be that it's the end of story, and that is an approach that I think, now that we are out of the heat of the crisis, we should take."

After early gains on the back of the Cyprus deal, Dijsselbloem's comments knocked European shares into the red while safe haven German Bund futures rose.

"Now that the crisis is fading out, I think we need to dare a little more in dealing with this," he said.
If adopted by the euro zone, that daring could also sound a death knell for a plan hatched nine months ago when the euro zone debt crisis was threatening to blow the currency area apart.
Then, euro zone leaders agreed the bloc's future rescue fund should be allowed to recapitalize banks directly, thereby breaking the debilitating link between teetering banks and weak governments forced to bail them out. That may now never happen.
Asked what the new approach meant for euro zone countries with highly leveraged banking sectors, such as Luxembourg and Malta, and for other countries with banking problems such as Slovenia, Dijsselbloem said they would have to shrink banks down.

"It means deal with it before you get in trouble. Strengthen your banks, fix your balance sheets and realize that if a bank gets in trouble, the response will no longer automatically be that we'll come and take away your problem. We're going to push them back. That's the first response we need. Push them back. You deal with them."


The marked change in attitude, which Dijsselbloem agreed was a shift in strategy for EU policymakers, has consequences for how banks are recapitalized and for how financial markets react.
One of the major steps the euro zone has taken over the past three years has been to set up a rescue mechanism with guarantees and paid in capital totaling up to 700 billion euros - the European Stability Mechanism.

The expectation was that the ESM would be able to directly recapitalize euro zone banks that run into trouble from mid-2014, once the European Central Bank has full oversight of all the region's banks.
The goal of the ESM and direct recapitalization was to break the so-called "doom loop" between indebted governments and their banking sectors. Now, Dijsselbloem says the aim is for the ESM never to have to be used.

"We should aim at a situation where we will never need to even consider direct recapitalization," he said.
"If we have even more instruments in terms of bail-in and how far we can go on bail-in, the need for direct recap will become smaller and smaller.

"I think the approach needs to be, let's deal with the banks within the banks first, before looking at public money or any other instrument coming from the public side. Banks should basically be able to save themselves, or at least restructure or recapitalize themselves as far as possible."

Dijsselbloem, 46, who took over as Eurogroup president only in January, said he had discussed the new approach with financial market participants and said he expected that they would adjust to the new regime over time.

"Now we're going down the bail-in track and I'm pretty confident that the markets will see this as a sensible, very concentrated and direct approach instead of a more general approach," he said.
"It will force all financial institutions, as well as investors, to think about the risks they are taking on because they will now have to realize that it may also hurt them. The risks might come towards them."

Today's links

1---We won’t [be] Germany’s slaves,”, RT

Capital controls are still in place in Cyprus, meaning that banks are able to impose restrictions on the amount of money citizens are able to take from the ATMs, or how much money they can move around.
“We have no cash. We are just… queueing behind the ATM machines, waiting to get some cash. For how long?” one resident said.
The restrictions are creating an intense atmosphere of uncertainty, and some mild hoarding of cash supplies.
“Everybody is trying to hold onto those 5 or 10 euros that they have just in case there’re even lower limits, because right now they can only take about 100 euros,” Arcilla reported.
Some are even feeling nostalgic for the old Cypriot pound.
“With the pounds – peace and quiet,” another resident said.
“It’s better to go back to the pound

2---New down payment requirements could crash housing again, oc housing

There are many more potential buyers with little or no savings than there are those with hundreds of thousands in cash in the bank. The size of the potential buyer pool rises or falls dramatically with changes in down payment requirements. A high down payment requirement greatly reduces the potential buyer pool whereas a low down payment requirement greatly increases it. This basic fact is why lenders and their lobbyists are working so hard to get down payment requirements lowered or eliminated. Any down payment requirement is an impediment to doing more business. In fact, if down payment requirements were reduced to zero, that barrier to home ownership would be effectively removed. Lenders tried that during the housing bubble, and it was a disaster. Lots of people who didn’t have any savings — or any sense of financial responsibility — took lenders up on their generous offers for free houses. This was a major contributor to the housing bubble and bust, and the resulting losses cost lenders — and taxpayers — billions.

Lending losses are the negative side effect of low down payment requirements. Lenders want to eliminate the down payment requirements to make more money on originations, but then they want to sell these loans off to investors, mostly with taxpayer backing, so they don’t have to absorb any losses when their loans go bad. The originate-to-sell business model is the best of both worlds...

So why has this subject been making headlines for well over a year? Here’s what started the debate:
“These underwriting standards include, among other things … a maximum loan-to-value (LTV) ratio of 80 percent in the case of a purchase transaction (with a lesser combined LTV permitted for refinance transactions); a 20 percent down payment requirement in the case of a purchase transaction…”
This quote comes from the Notice of Proposed Rulemaking published by federal banking regulators in March of 2011. This is the match that lit the fuse of controversy, complaint and lobbying. Though this was only a proposal (and there’s a wide chasm between proposal and passage, when it comes to federal laws), it did signal the desires of regulators to impose a 20% down-payment rule for purchase mortgages. It’s right there in black and white.
Let’s hope that requirement remains in black and white in the final draft of the rules. With all the lobbying for a zero requirement, I suspect a 5% or 10% requirement is more likely despite the obvious risks to taxpayers, homeowners, and communities when lenders inflate another housing bubble.

3---From S&P: Home Prices Accelerate in January 2013 According to the S&P/Case-Shiller Home Price Indices , calculated risk
Data through January 2013, released today by S&P Dow Jones Indices for its S&P/Case-Shiller Home Price Indices ... showed average home prices increased 7.3% for the 10-City Composite and 8.1% for the 20-City Composite in the 12 months ending in January 2013.

“The two headline composites posted their highest year-over-year increases since summer 2006,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “This marks the highest increase since the housing bubble burst."
In January 2013, nine cities -- Atlanta, Charlotte, Las Vegas, Los Angeles, Miami, New York, Phoenix, San Francisco and Tampa -- and both Composites posted positive monthly returns. Dallas was the only MSAwhere the level remained flat.
Case-Shiller House Prices Indices Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 29.3% from the peak, and up 1.0% in January (SA). The Composite 10 is up 7.3% from the post bubble low set in Feb 2012 (SA).

The Composite 20 index is off 28.4% from the peak

4--The Big Picture

Source: Econbrowswer

5---The avoidable deposit insurance mistake, VOX

First, the plan disregarded the lessons of financial history about the high importance of deposit safety. This is particularly important for middle-class households (which is why there usually is an upper limit for explicit deposit insurance, harmonised at €100,000 in the EU since 2009).
  • Based on the experience of the early 1930s, it is virtually undisputed in the US that a breach of deposit insurance will primarily hurt the 'little guys'.
Sheila Bair, the respected former Chairman of the US Federal Deposit Insurance Corporation, has expressed this view with reference to Cyprus (Hobson, 2013). Similar lessons arise from the record of many recent emerging-market crises.
  • Even if, as alleged, it was Cyprus’s own president who recommended hurting small depositors, European negotiators were not justified in going along.
  • After all, in November 2010 the Troika did a similar thing with Ireland.
The EU, ECB and the IMF rebuffed Irish authorities’ proposal to 'burn' the holders of senior unsecured debt in failed banks. The refusal was aimed at preventing damaging contagion in the rest of Europe.
  • A similar argument was more straightforward and sensible for Cyprus than it had been for Ireland, and should have led them to oppose Mr Anastasiades’ proposal from the outset
6---Moral hazard in EZ, IFR, (shrinking the EU banking system)

Moral hazard may not be quite dead in Europe but it has a bad, hacking cough.
A new, tougher policy on banking bailouts, made flesh in Cyprus and enunciated by Dutch Finance Minister Jeroen Dijsselbloem, will shrink Europe’s arguably overly-large banking system and, ultimately, may put unbearable pressure on the currency union.

Actually the policy, allowing holders of bonds and uninsured depositors in insolvent banks to actually lose money, is not so much new as a return to following the rules of capital structure, with equities taking the first loss and uninsured deposits the last to suffer.

It does mark a huge change from how Europe, and the US, have handled bad banks since the crisis began, sheltering creditors and depositors from the consequences of their risk-taking in ways that make them likely to take on more and sillier risks, a syndrome called moral hazard.
“If there is a risk in a bank, our first question should be ‘Okay, what are you in the bank going to do about that? What can you do to recapitalise yourself?’,” Dijsselbloem, who also heads the Eurogroup of euro zone finance ministers, told Reuters and the Financial Times.

“If the bank can’t do it, then we’ll talk to the shareholders and the bondholders, we’ll ask them to contribute in recapitalising the bank, and if necessary the uninsured deposit holders,” he said.
“It will force all financial institutions, as well as investors, to think about the risks they are taking on because they will now have to realize that it may also hurt them. The risks might come towards them.”

After a first, and disastrous, plan which would have violated the spirit of an EU policy of insuring accounts of less than €100,000, Cyprus, the EU and IMF eventually agreed a banking bailout which shielded small accounts and concentrated pain not only on those larger than the limit, but on depositors in the weakest banks.
Even more significant was the decision to force senior bondholders to accept losses. Both moves will give pause to investors who provide money to banks in Europe, who will likely now either decide this is not worth the risk, or who will demand better compensation for the hazards which now fall on them.....

This is also going to increase pressure for a controlled breakup of the euro, and may make it inevitable. Cyprus, like Greece, is going to suffer a massive implosion of its economy without being able to devalue its currency. That may well prove intolerable.
Those two realizations – that investors need to look out for themselves and that the euro’s center may not hold – are as big as they are scary.

This is an excellent policy but one which is going to hurt a great deal. It is not simply that this partly undoes the policy of public insurance against private risks which generate private gain. It also acknowledges, tacitly, that the debts within the euro zone may be too large, that losses must be suffered to allow restructuring to happen on better foundations.

7----Amanda Knox is ordered to stand trial for murder in Italy again, LA Times

Kercher, 21, was found with her throat slashed and more than 40 stab wounds. Authorities said there were signs of sexual assault.
Knox and Sollecito spent four years in prison before their acquittals. In a separate trial, Ivory Coast-born Rudy Guede was sentenced to 16 years in prison for his role in the slaying.

Knox's story about her whereabouts that night changed over the course of the case. After saying she had heard Kercher's screams, she denied it, saying brutal interrogations had forced her to make false statements.

Italian prosecutors said Knox's DNA had been found on the knife that killed Kercher, but that finding that was later undermined by an independent review that said the evidence had been severely compromised by sloppy police work.

8---Consumer confidence slumps in March, marketwatch

New York Fed President William Dudley said Tuesday that the combination of higher payroll tax rates, increased taxes on high-income earners, the new taxes from the Affordable Care Act, and the sequester will combine for a 1.75 percentage point drag on gross domestic product this year.

The index was the second large drop in three months. That said, retail sales growth has been solid the first two months of the year, posting monthly gains of 0.2% in January and 1.1% in February.

“The expectations number, if sustained, is consistent with zero growth in spending, but it is not always right. Thankfully,” said Ian Shepherdson of Pantheon Macroeconomic Advisors, in a note to clients.

One element of the consumer confidence report that economists focus on had a mixed result in March. Those who said jobs are “plentiful” fell to 9.4% from 10.1%, but those who said jobs are “hard to get” also fell, to 36.2% from 36.9%.

9---European Union imposes bank bailout on Cyprus, wsws

Ahead of the final round of discussions on Sunday, EU officials insisted on installing an economic dictatorship over the Cypriot economy. The measures included controls to prevent large-scale capital flight, restrictions on the use of bank accounts, and the imposition of limits on the amount of money withdrawn from ATM machines. Anti-democratic regulations passed by the parliament in a late-night sitting on Friday also included the provision for the Central Bank to adopt any steps “for reasons of public order or safety.”

10---Investors Pile Into Housing, This Time as Landlords, WSJ

Whether they knew it or not, investors helped set a floor. They warmed up the market, and it brought buyers back," said Lanny Baker, chief executive of real-estate brokerage ZipRealty.
Investors have always played a role in the housing market, but their presence was often small. Currently, cash buyers—largely investors—make up about 32% of sales nationally, according to the National Association of Realtors. In Southern California, a favorite target for investors, absentee buyers accounted for 31.4% of purchases last month, up from an average of less than 17% between 2000 and 2010, according to DataQuick MDA, a real-estate research firm.
While some firms have focused only on Sunbelt markets with newer housing stock, others are branching out. American Residential Properties Inc., which began amassing hundreds of homes in Phoenix four years ago, earlier this month bought 93 homes in Chicago's southern suburbs, bringing its total there to around 300. On Friday, the company said it planned to raise $300 million in an initial public offering,

The rush of investors into the housing market follows a long push by federal policy makers to foster the American dream of homeownership that unraveled for some people in the housing crash. The homeownership rate fell to around 65% last year from 69% in 2005. "We're clearly at the beginning of a rental boom," says Christopher Thornberg of Beacon Economics. "We all saw there had to be a shift towards renting single-family units that owners could no longer afford. Investors played a critical role in that transformation."
Their arrival will further transform some communities already hit hard by foreclosures and falling home prices. Renters have less of a stake than do homeowners. But deep-pocketed investors can still be good news for neighborhoods that otherwise would be at risk because so many homes had been neglected.

The house-rental market long has been dominated by mom-and-pop outfits, including retirees, real-estate brokers, doctors and other professionals, and they still account for most investor purchases. Over the past year, large private-equity firms such as Blackstone Group BX +1.35% and Colony Capital have spent billions of dollars buying up single-family homes. Blackstone says it has purchased 20,000 homes since early last year. It is buying more than $100 million worth of homes a week and has spent $3.5 billion so far....

Investors are concentrating on markets that have cheap housing and where job growth—and rental demand—is revving up. A year ago, Phoenix became the hottest target, and with prices there up by 20% since early last year, investors have raced to find similar discounts in other metro areas. Silver Bay Realty Trust Corp., SBY +2.89% which last year became the first publicly traded home rental firm, owned some 3,400 homes in 10 different markets from Phoenix to Atlanta to Tampa, Fla., at the end of 2012....

Not everyone believes that the current level of investor activity is healthy. Some worry that investors will eventually flee the housing market if values erode again or if the expense of maintaining a large number of homes becomes onerous. "Are they going to continue to maintain them? Or are they going to dump them into the single-family market?" said Mr. Thornberg of Beacon Economics.
Some investors have a notorious history in the housing market. During California's housing bust in the late 1980s and early 1990s, the federal government sold hundreds of homes in California's San Bernardino and Riverside counties, about an hour east of Los Angeles. Some homes weren't maintained, turning entire neighborhoods into shabby rental communities.

Colony's Mr. Chang said sophisticated real estate professionals are unlikely to repeat such practices. "If you're building the business for the long term, which we are, the incentive is to make sure the assets are looking good," he said. "If you let them go, tenants will leave." ...

Purchased homes get fresh paint, carpet, appliances, fixtures, and granite countertops. Skimping on repairs only leads to higher expenses later, said Mr. Pintar, who owns a separate property-management company.

Monday, March 25, 2013

Today's links

"Cyprus is now very overvalued — not only have the big capital inflows of yore dried up, a major export industry — offshore banking — has just died." Paul Krugman, NYT

1---Cyprus on the ropes, Daeth by bailout, Merkel gets her pound of flesh, naked capitalism

Here is the Prodigal Greek‘s summary of the major provisions of the legislation (hat tip David P):
Restrictions in daily withdrawals
Ban on premature termination of time savings deposits
Compulsory renewal of all time savings deposits upon maturity
Conversion of current accounts to time deposits
Ban or restrictions on non cash transactions
Restrictions on use of debit, credit or prepaid debit cards
Ban or restriction on cashing in checks
Restrictions on domestic interbank transfers or transfers within the same bank
Restrictions on the interactions/transactions of the public with credit institutions
Restrictions on movements of capital, payments, transfers
Any other measure which the Finance Minister or the Governor of Cyprus Central Bank see necessary for reasons of public order and safety...
First, confiscating bank deposits is now on the table in any future crisis. That’s toothpaste that’s not going back in the tube. Commerzbank chief economist Jörg Krämer has already suggested (Google translates) “a one-time property tax levy” for Italy and “a tax rate of 15 percent on financial assets.” And adding fuel to the fire, the Leader of the UK Independence Party has urged expats in the periphery countries, in particular the 750,000 British in Spain to “Get your money out of there while you’ve still got a chance.”
Second, capital controls in Cyprus mean that there are now two Euros in effect: The Euro that you can use only in Cyprus, and the Euro you can use elsewhere in the so-called “monetary union.” So from the perspective of people in Cyprus, the results are in some ways worst that a breakup: rather than having depreciated dough, you have dough that has been impounded, particularly in terms of using it outside Cyprus....

As if it was not clear before, it is perfectly clear now that the EU has no real institutional processes for this topics and basically makes things up as it goes along, based on what 4-5 people in a room decide at 3am. It is quite unbecoming for a serious Western super-power.
1. Laiki is resolved via good bank / bad bank, with uninsured depositors (4.2B) most likely losing everything (along with shareholders and bond holders).
2. Bank of Cyprus will have a bail-in of uninsured depositors, with them losing between 30-40% most likely. Shareholders and bond holders will be wiped out.
3. Troika will lend 10B to the Cyprus government, solely for fiscal purposes and based on a memorandum to be determined. None of the troika funds will be used for the bank bailout.
4. Insured depositors will be protected (sub 100K euros....

1. This will have an immediate negative effect on the local real economy through two mechanisms: (a) loss of savings of consumers hitting consumption and (b) partial or full loss of operating accounts of local businesses, some of which will never recover. The small and medium businesses in Cyprus will face a wave of bankruptcies unfortunately.
3. Net net, we should expect a drop in GDP over the next 2 years in the 20-30% range. This will inevitably lead to significant social and business disruptions and hardship and greater need for fiscal consolidation (as certainly tax revenue will shrink and automatic stabilizers will increase). Government employees, take note…
4. Overall, this will be a very severe recession / depression....

The early estimates (not official, just based on a look at the balance sheet and knowledge of what was on it) was that the Laiki depositors >€100,000 would be very lucky to get anything back, and the Bank of Cyprus losses for the over €100,000 depositors had been 22% to 25%, and that may not include the ELA transfer, which would presumably increase the losses considerably.
Admittedly, at this point, the inertial course would be to approve the agreement. However, the influential Archbishop of Cyprus advocated leaving the Eurozone over the weekend. That plus a show of outrage from the population could undo what seems to be a settled deal. And that would have more immediate, unexpected ramifications

MoU must be approved by Parliament

2---The Broken Euro, copola comment

Imagine you live in a prosperous country, with a lovely climate, beautiful beaches, blue seas. But there's something funny about this country. It doesn't have a functioning banking system.

You can put money into your bank, but you can't get it out again. At least you can, through ATMs, but only in very small amounts.

If you have money on deposit, you can't take the money out and close the account. And if it's a time deposit, when it reaches the end of its life, you can't have the money to spend. You have to roll it over into a new deposit.

You can't cash a cheque in a high street bank. You can't pay bills in a high street bank, either. And no high street bank is lending any money, so if you want a loan, forget it. In fact high street banks are not much use.

Your employer pays you in cash, because there are no electronic payments. Which is just as well, really, because you need cash. There are no automated payments such as direct debits, so you pay all your household bills in cash. Credit and debit cards are no longer accepted anywhere, so you buy all your shopping and petrol for your car with cash. You can't make phone or internet purchases

3---  If housing is booming, why are mortgage originations so low?, Dr Housing Bubble

California home sales are down 3 percent on a year-over-year basis for the last month of data.  When we look at US purchase loan originations we find the volume and amount being pushed out to be at levels last seen in the 1990s.  What gives?

The non-existent home buyers
The housing market is largely being driven by investors.  The noise that we are seeing is large money from both Wall Street and foreign money clogging up real estate across the US.  Foreign money is more concentrated in targeted niche markets while big money is dominating places like the Inland Empire, Arizona, Nevada, and Florida.  One interesting chart shows how distorted this current market is:
Bloomberg) With all the real estate investment action, you’d expect the number of new mortgage loans to be shooting upwards. No such luck. Look at the chart below, which shows new purchase mortgages through the 3rd quarter of 2012, using data from the Mortgage Bankers Association. For that quarter, buyers took out $129 billion in purchase loans. Not only is that much lower than the numbers from the boom, but it’s less the post-crash levels of 2009. You need to go back to the mid-1990s to get back to numbers like those (and they’re not adjusted for inflation).”
 The obvious reason for this is that the volume of all cash buying form investors is off the charts.  We’re not talking about a handful of buyers but billions upon billions of dollars flowing into the housing market from sources outside of your traditional buyer.  Couple this with Fed and government regulations that now allow banks to rent homes out plus the fact that many of these investors are buying to hold for a few years and then sell, you end up simply removing inventory from an already depleted market.
 The hunger for rentals is high but there seems to be some market saturation that is now occurring.  In California, we have become an even larger renter state since the housing market peaked in 2007...

We noted that last month we had the largest amount of all cash sales in the history of SoCal (some 35.6 percent of all sales).  Cash buyers paid a median price of $260,000 in SoCal so this is likely to be a larger pool of investment properties for rent versus foreign money that is bidding properties up in niche markets

4---QE loses its punch, oc housing

Each round of quantitative easing has less impact on the economy.

Nolte noted that “economic growth, erratic as it is, is likely to impact the bond market well in advance of the Fed deciding to pull liquidity from the system and begin a campaign of raising rates.”
5---Men live in Guantanamo animal cages, will never get trials’, RT

6---No money down mortgages return, Housingwire

NASA Federal Credit Union and Navy Federal Credit Union are offering members mortgages that do not require a down payment or mortgage insurance.
This type of loan contributed to the burst of the housing market in 2008, but both banks said they believe their underwriting standards and member relationships will protect everyone from loan losses, Credit Union Times reported.
Bill White, vice president of residential lending at NASA Federal Credit Union, said the bank focuses on members' ability to repay the loan instead of what might happen to the value of the underlying asset.
White added, "It really is all about our members. They understand how the credit union seeks to help them and they want to help the credit union too."

7----Hot money blues, NYT

the truth, hard as it may be for ideologues to accept, is that unrestricted movement of capital is looking more and more like a failed experiment.
It’s hard to imagine now, but for more than three decades after World War II financial crises of the kind we’ve lately become so familiar with hardly ever happened. Since 1980, however, the roster has been impressive: Mexico, Brazil, Argentina and Chile in 1982. Sweden and Finland in 1991. Mexico again in 1995. Thailand, Malaysia, Indonesia and Korea in 1998. Argentina again in 2002. And, of course...: Iceland, Ireland, Greece, Portugal, Spain, Italy, Cyprus.
What’s the common theme...? Conventional wisdom blames fiscal profligacy — but ... that story fits only one country, Greece. Runaway bankers are a better story... But the best predictor of crisis is large inflows of foreign money: in all but a couple of the cases I just mentioned, the foundation for crisis was laid by a rush of foreign investors into a country, followed by a sudden rush out. ...
Now what? I don’t expect to see a wholesale, sudden rejection of the idea that money should be free to go wherever it wants, whenever it wants. There may well, however, be a process of erosion, as governments intervene to limit both the pace at which money comes in and the rate at which it goes out. Global capitalism is, arguably, on track to become substantially less global.

8---Real wages decline, nobody notices, middle class economist

Your read it here first: Real wages fell 0.2% in 2012, down from $295.49 (1982-84 dollars) to $294.83 per week, according to the 2013 Economic Report of the President. Thus, a 1.9% increase in nominal wages was  more than wiped out by inflation, marking the 40th consecutive year that real wages have remained below their 1972 peak.

Yet no one in the media noticed, or at least none thought it newsworthy. I searched the web and the subscription-only Nexis news database, and there are literally 0 stories on this. So I meant it when I said you read it here first. In fact, there was little press coverage of the report at all, in sharp contrast to last year.
...if you've been paying attention, you know the drill: higher productivity plus lower wages = greater inequality. The question is, why aren't our media paying attention when real wages fall, yet again?

9---And the Darwin Award goes to..., IFR

WE ARE APPROACHING the sixth anniversary of BNP Paribas’ notorious announcement that it could no longer apply proper valuations to some of its funds containing structured products, the first indication that not all was well with an economic model based on borrowing to spend.

Many trillions of dollars, pounds and euros of rescue funds later, it appears to me as though underlying attitudes to what one can take out of the system relative to what one has put in have not really changed. One might be able to temporarily suspend Darwin but one cannot make him go away

10---Learning from Cyprus, IFR

Cyprus is struggling under the weight of a bloated and dangerously shaky banking sector which has grown to more than seven times the size of its economy, largely on the back of taking in off-shore deposits from wealthy Russians. While this is a risky business model for an economy under the best of conditions, it becomes a disaster when that huge banking sector invests heavily in domestic real estate and Greek debt, both of which have plunged in value.
A member of the euro currency, Cyprus first struck a deal with the EU and the International Monetary Fund for a bailout which included an involuntary contribution, called a levy, from bank depositors. This deal, now in flux, called for accounts under €100,000 to be snipped by 6.75% and larger accounts, many off-shore money, by 9.9%. Cyprus has been on an extended bank holiday since the bailout was first mooted, effectively trapping deposits.

Feeling repressed

Financial repression, which takes many forms, has historically been a popular way for governments to dig themselves out of debt holes. A prime way to do this is to keep interest rates artificially low – quantitative easing anyone? As well, governments can and do try to capture pools of capital by, if not confiscating it, then at least channeling it in ways which will be useful to the government in addressing its debt problems.
A great example of this is forcing pension funds to invest in government debt, or, as is being considered in Cyprus, in a kind of national fund.
Any roadblock to the free movement of capital is a form of financial repression. Cyprus, where depositors are likely to receive either shares or bonds issued by the banks in which they hold money, is a perfect example.
More of this is coming. My guess is you are better off at home than abroad, as it is harder to do voters out of their capital than honored guests, as the Russians have learned.
Bottom line on Cyprus is: don’t over-react, but don’t be surprised if more of this kind of thing happens

11---From hedge
Depression for Cyprus: Our Cypriot GDP forecast entails a drop of just over 20% in real GDP by 2017. This forecast had already factored in much what was agreed, but did not account for the additional uncertainty shock generated by the past week’s appalling political mess. Risks are clearly on the downside and Cyprus will in all likelihood require additional financial assistance further down the road. Accounting for less than 0.3% of euro area GDP, any downward revision to Cyprus will be barely visible on the euro area aggregate.
12---Mortgage rates near all-time low, WSJ

Mortgage rates continue to plumb historically low levels, on the threshold of the industry’s key spring home-sales season. The rate on a 30-year fixed-rate mortgage ticked down to an average of 3.54% in the week ended on March 21 from 3.63% the previous week. That also is down from 4.08% — the average rate for a 30-year fixed-rate mortgage a year ago.
13---Tyler Cowen:
What to look for in the Cyprus deal: The capital controls will have to be strict. What will the price of a Cypriot euro be, relative to a German euro? 50%? I call this Cyprus leaving the euro but keeping the word “euro” to save face