Tuesday, May 7, 2013

Today's links

1---What Happens to the Housing Market When the Investors Leave, US News

2---China' weak credit transmission, sober look

China is awash with liquidity. New domestic bank loans have seen some of the strongest growth in years and broad money supply is increasing at nearly 16% per year. Furthermore, property loans have risen 16.4% from the previous year to 13 trillion yuan ($2 trillion

3---Abenomics sends stocks skyrocketing, economists view
14,000, by Tim Duy: Seems like just yesterday Japanese policymakers were looking to push the Nikkie to 13,000. It even seemed like a overreaching at the time. Here is Matthew Boesler at Business Insider:
The 13,000 index target implies around 17 percent upside in February and March. The pace may sound ambitious, but then again, Japan is one of the hottest momentum trades in the world right now.
Today the Nikkei pushed past 14,000:
Note too that the 10-year Japanese government bond holds well below 1 percent - fears that aggressive policy would cause rates to skyrocket are once again proved
4---QE and stocks; An oversimplification?, Big Picture
Fed vs S&P
Source: Doubleline, ZeroHedge
I think the big story is how LITTLE the Fed is able to impact things.
We have unprecedented ZIRP and QE and yet have a pretty anemic job recovery and nothing stellar for corporate earnings. To a certain extent the Fed has been pushing on a rope. normally, they should have been able to accomplish our economic metrics and still have, say, a 3% or so Fed Funds rate without entering into the long Treasury market in a big way.

After several years of low rates like that, people would normally already be nattering about over-heated sectors of the economy and when will the Fed start to take action to slow things down – now we have a Fed announcing that these policies will likely be in place for 2 more years and people are wondering if there is more they can do to jolt the economy.
MarkKlose says:
While it is certainly true that low rates can contribute to corporate profitability, due to slack demand in many industries we’ve seen significant corporate deleveraging over the last few years with massive cash building on corporate balance sheets. That cash is earning little and is a drag on ROE. The most recent Fed Senior Loan Officer Survey reports that demand for C&I loans is just now starting to pick up and that while underwriting is still tight, it is easing modestly. This said, there are several industries that have clearly benefited and many have boosted eps with low-cost financing of buybacks

hack says:
The single largest impact ZIRP has on any asset price (including stocks) is its role on the discounting of future cashflows. That is the Fed’s whole/main point, isn’t it? Inflate/maintain residential/commercial real estate prices so banks have time to heal their balance sheets.
Lowering the discount rate through ZIRP cannot be directed only to real estate, therefore any and all assets benefit. One cannot expect ZIRP to only affect one component of the capital stack. If ZIRP inflates bond prices, then it will inflate equity prices (i.e. you will not have lower expected returns on corporate bonds & junk bonds and at the same time not expect future returns on stocks to not also be lowered).
No one knows the precise impact of ZIRP on stock prices but it is large and it has definitely lowered expected returns through increasing price – just as it has for bond, buildings, houses, etc

5---Baghdad Bombings Continue: 31 Killed, antiwar

6---Europe on the eve of mass working class struggles, wsws

Today, the divisions within Europe are more profound than in the days of the Berlin Wall and the “Iron Curtain.” An ever-growing gulf between rich and poor is opening up across the continent. The number of people unable to pay their rent or afford the cost of education is growing daily, while a small and obscenely rich minority imposes its will on society.

A criminal financial elite dictates policy. Taxpayer funds totaling €1.6 trillion have been handed over to ailing banks and the resulting state debt is being financed at the expense of the population in the form of sweeping cuts in social programs, education and pensions.

Against the background of the greatest economic crisis since the 1930s, the European Union is showing its true face. It is not an embodiment of the “unity of Europe,” as the propagandists of the establishment political parties claim, but rather a dictatorship of finance capital over Europe. It serves not, as initially intended, to integrate and restrain German imperialism within a European confederation, but instead functions directly and openly as the instrument of the largest and most powerful banks and corporations, many of which are based in Germany.

The German government utilizes the euro and the European Central Bank (ECB) to direct capital flows to Germany, plundering and dominating weaker countries in Europe. It forces elected governments to resign and replaces them with technocratic governments of its choosing. It sets aside parliamentary decisions and overrides legal norms.

The diktats from Brussels and Berlin have destroyed social welfare systems, deprived millions of pensioners of hard-earned savings, and driven countless families into poverty and misery. Seventy years ago, the Nazis and the Wehrmacht terrorized Europe. Today it is the European Union’s “troika” and Deutsche Bank.

Under these conditions, social tensions are intensifying. Dissatisfaction and outrage are growing apace. Given the never-ending stream of social attacks, broad layers of the population are losing all confidence in the economic viability and moral validity of capitalism. The bourgeois media now openly debate how long it will take until Europe “goes up in flames.”...

In response, the political parties are closing ranks. Whether they call themselves conservative, liberal, social democratic, green or left, all of the established parties support the EU’s austerity drive or attempt to divert popular opposition along right-wing, chauvinist channels.
The unions are integrating themselves ever more openly into the state apparatus. They defend the “national interest” of their own ruling class and serve as business contractors to impose mass layoffs and cuts in wages and benefits....

The ruling class is reacting to mounting social tensions as it did 80 years ago, with attacks on democratic rights and the strengthening of the state apparatus at home and militarism abroad. Democratic elections have degenerated into a meaningless farce.

Regardless of the will of the voters, government policy is determined by the financial markets. In February, voters in Italy gave a massive thumbs down to the austerity policies of the Monti government, only to be saddled, following two months of closed-door political haggling, with a grand coalition government pledged to pursue exactly the same course.

In Germany, business interests will determine the policy of the next government, regardless who wins the election in September.

All over Europe, state apparatuses are being strengthened and state surveillance intensified. In Germany, the Federal Constitutional Court has largely abolished the separation of the police and intelligence agencies and legitimized combat missions by the military within the country’s borders. Its role model is the United States, which, since the September 11 attacks has built up a powerful spying and police apparatus in the form of the Department of Homeland Security.

A particularly pernicious role in the maintenance of the bourgeois order and the political oppression of workers is being played by supposedly “left” parties and their pseudo-left hangers-on, such as SYRIZA in Greece, the French Parti de Gauche (Left Party), Communist Refoundation in Italy, and the Left Party in Germany.

They all defend the European Union, the most important instrument of social counterrevolution in Europe. When these parties obtain positions in government, they cut social spending and strengthen the state apparatus.

7---CoreLogic: House Prices up 10.5% Year-over-year in March, cal risk

A 10% rise in prices should theoretically disqualify some 20% of potential buyers.
There's never been a better time to lower lending standards and push rates down further!

Exactly. From the monthly nut perspective prices haven't risen so much as rates have fallen. This is why te Fed cannot stop buying.

Ironically, if there were a way to erase that speculative bubble, prices right now would nearly be on a long term linear trend of a slight rise about on par with inflation. In which case, the momentum behind that bubble would have largely dissipated, housing would be boring again, and prices would resume a long, slow upward trend.

8---Why the Dow is meaningless, Bloomberg video

9---Jobs Gains Are Strong, Wages Not So Much, WSJ

Good time to be a waitress looking for work, hard times if you’re seeking a factory job.
Friday’s employment report was better-than-expected, with April net hiring at 165,000 and strong upward revisions to February and March. Even the drop in the jobless rate to 7.5% was “real,” meaning it came from unemployed people finding work, not from people giving up and leaving the workforce.

The April jobs report is certainly good news for the economic outlook and it offers evidence that the spring slowdown will not last into summer.

The details, however, should raise worries about the financial situation of the consumer sector. Simply put, the jobs being created are mostly not high-paying, and businesses are relying more on part-timers and temporary help rather than putting on full-time staff.

10--The Federal Reserve: Banks “Experienced Stronger Demand” for Loans in April, prag cap

11---Corporate Profits as a Percentage of GDP Hits All-Time High, prag cap
Note these

12---Money Laundering and The Drug Trade: The Role of the Banks, global research

13---Sequester Actually Increases Spending. So Repeal It, smirking chimp

14---Zero Manufacturing Jobs Added. Zero., smirking chimp

15---The federal reserve is inflating a bubble in the apartment market, oc housing

16---Big jump in pre-foreclosure activity, Dr Housing Bubble

investors and hot money are targeting certain markets in droves.  The idea is that regular buyers are a big part of the market recovery but they are not as indicated by the number of purchase applications:
The volume of purchase applications is nearly the same as it was in the late 1990s.  Nothing remotely close to the peak days in 2004 and 2005.  Of course this is coming from virtually a third of buyers being investors.  In some markets like in Arizona the number of investors is even higher.

17---Wells Fargo and Bank of America have flagrantly violated those obligations, putting hundreds of homeowners across New York at greater risk of foreclosure, CNBC

New York Attorney General Eric Schneiderman announced Monday he is suing Bank of America and Wells Fargo for, "339 violations of standards agreed to," under the National Mortgage Servicing Settlement. That settlement, signed by the nation's five largest lenders in early 2012, was the result of so-called "robo-signing," or foreclosure paperwork infractions and fraud.
"The five mortgage services that signed the National Mortgage Settlement are legally required to take specific, rigorous, and enforceable steps to protect homeowners," Attorney General Schneiderman said. "Wells Fargo and Bank of America have flagrantly violated those obligations, putting hundreds of homeowners across New York at greater risk of foreclosure. I intend to use every tool available to my office to hold these companies accountable under the terms of the National Mortgage Settlement." ....

There is still a considerable pipeline of delinquent loans in states where a judge is required in the process. Florida, New York and New Jersey are looking at several years' worth of backlogs.


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