Monday, July 29, 2013

Today's links

1--This is our world, naked capitalism

....a single megapower has, since September 2001, been in a financing and construction frenzy to create the first global surveillance state; its torturers run free; its kidnappers serve time at liberty in this country and are rescued if they venture abroad; and its whistleblowers — those who would let the rest of us know what “our” government is doing in our name — are pilloried.  And so it goes.
All of it adds up to a way of life and the everyday tradecraft of a one-superpower world

2--Taper to begin in September, sober look

 Impact on interest rates: Certainly with the Fed exiting treasury purchases, the demand for US government paper should will be reduced, pushing yields higher. But given the recent fiscal tightening in the US (due in large part to the sequester), treasury issuance is expected to decline - at least in the near term (chart below). The Fed will view this decline in the federal government's borrowing needs as counteracting its reduction in purchases and keeping rates under control in the near term...

 the Fed is likely to shave off some $15-$20bn from its monthly purchases. With Bernanke likely departing early next year, the Fed is eager to wrap up this latest round of purchases soon and focus on the more traditional policy tools such as short-term rates and forward guidance

3---Wall Street wins again: No down, no risk-retention loans (guaranteed by Uncle Sam)  to become norm; housingwire

HousingWire caught up with Stevens this week after rumors surfaced, suggesting regulators would scrap a 20% downpayment requirement for any financial institutions that wants to avoid retaining a 5% stake in mortgage securitizations sold off onto the secondary market.

In other words, the qualified-residential mortgage rule may be re-proposed without a strict downpayment requirement to allow more firms to avoid risk-retention, the Wall Street Journal first reported.

"Assuming this is true, it is the right move for consumers and homebuyers," Stevens told HousingWire.

"The qualified mortgage rule, which has already been released by the CFPB, clearly defines what is a safe and sound mortgage, and the qualified mortgage rule gets rids of all unsafe products that caused so many problems for the country."

Without some tweaks to the original QRM proposal, the requirements would only "tighten credit in an already tightened market," Stevens noted.

Stevens also is generally positive about all the housing-related legislation moving slowly, but diligently, through the House and Senate.

There’s the Corker-Warner bill in the Senate, the Johnson-Crapo FHA reform bill in the same chamber and Rep. Hensarling’s GSE and FHA reform legislation.
"There is a lot of momentum to do something legislatively … to get a solution to determine the government’s role in housing finance. All of that is very positive," Stevens said.
He admits all of the bills still need diligent tweaking, but he’s focused on the end-goal of watching some type of final proposal come into fruition.

"Getting overly agitated about any one of the bills is less productive than really getting into the debate and insuring that the core aspects of the bills are the most effective," he explained.
As for the to-be-announced market, Stevens reiterated his long-term push for the preservation of some type of government guarantee. This is one of the areas where he questions part of House Financial Services Chairman Jeb Hensarling's GSE reform legislation

4---"Housing" - Is It Really Recovering? Streettalk Live

Home Ownership
The simple reality is that there has really been very little actual recovery in housing, and as shown in the first chart above, which explains its weak contribution to economic growth.  The chart of home ownership really shows the lack of recovery the best.
Housing-ownership-072513
At 65% the current level of home ownership is the lowest that it has been since the early 1980's. ...
 
REO To Rent
While the Federal Reserve and the current Administration have tried a litany of programs to jump start the housing market nothing has worked as well as the "REO to Rent" program.  With Fannie Mae/Freddie Mac, and the banks loaded with delinquent and vacant properties, the idea was to sell huge blocks of properties to institutional investors to be put out as rentals.  This has worked very well.  
The chart below shows the number of homes that are renter occupied versus the seasonally adjusted home ownership rate.
Housing-Ownership-Renters-072513
Do you see the potential problem here?  Speculators have flooded the market with a majority of the properties being paid for in cash and then turned into rentals.  As this activity drives the prices of homes higher, reduces inventory and increases rental rates - it prices out "first time homebuyers" who would become longer term home owners.  The problem is that when the herd of speculative buyers turn into mass sellers - there will not be a large enough pool of qualified buyers to absorb the inventory which will lead to a sharp reversion in prices
 
5--2009 archive: Obama ALWAYS supported austerity---Obama Planning to Slash Deficit, Despite Stimulus Spending, NYT
 
 
So, are we in a 2007 or 2000 type environment?  Yes.  I would say we are given that the data is confirming the same sort of market trends and debt trends.  But the question is what’s the trigger?  The market is kind of like a Jenga set at this stage in the cycle.  Everyone knows it can probably be toppled by the wrong move.  But that move might not come this year, nexy year or in the next few years.  As Keynes said, “Markets can remain irrational a lot longer than you and I can remain solvent.”
margin_debt
 
 
For more than four decades, the ruling elite has been dismantling the country’s industrial infrastructure and shifting its investments to financial manipulation and speculation. The result has been a staggering growth of financial parasitism, embodied in the immense power wielded by Wall Street and the stock market over every aspect of economic, social and political life.
 
The increasing separation of the process of wealth creation for the ruling elite from the creation of real value has led to a rotting out of the economic foundations of the United States. Today, over 50 percent of US profits are generated by the financial sector.

This process of financialization has created within the ruling class a powerful constituency for the most rapacious and outright criminal policies, both at home and abroad. This financial aristocracy will brook no retreat from a policy of war and aggression internationally, and economic plunder within the US. The banks and hedge funds that hold Detroit’s municipal bonds speak for Wall Street as a whole in demanding the destruction of workers’ pensions and health benefits and the stripping of any public assets that can be turned into cold cash for themselves.

Militarism abroad and social counterrevolution at home require the preparation of dictatorial forms of rule to suppress and terrorize the population. Hence the erection of vast and illegal spying networks and the buildup of the police powers of the state......

There are today overwhelming economic, social and political obstacles to any, even modest, policy of social reform, such as that carried out by Franklin Roosevelt in the 1930s or Kennedy and Johnson in the 1960s. There is no basis within the framework of bourgeois policies for progressive change.....
One would hardly have known, based simply on the interview, that he has been in office for four-and-a-half years, let alone that he has been pursuing, and continues to pursue, policies that have devastated the living standards of working people and contributed to a deepening of the economic slump.
Most striking was Obama’s failure to mention—and the failure of the Times to raise—the bankruptcy of Detroit, which had been announced just six days prior to the interview. Obama’s supposed “obsession” with the plight of ordinary people somehow failed to take into account an unprecedented action whose overt purpose is to use unelected officials to rip up agreements and drastically slash the pensions and health benefits of city workers and their families—a landmark event that is widely being trumpeted as the model for other cities across the United States.

This was not an oversight. Obama could hardly mention Detroit while posturing as the tribune of working people, since his administration is refusing to provide any aid to the city and, in fact, supports the bankruptcy filing and attack on workers’ pensions.
Moreover, amidst the rhetoric about helping the “middle class,” Obama made clear that he supports more cuts in social spending. He is, he declared, for “the right cuts, smart cuts.” The government, he said, should make sure that “the drop-off in government spending on vital things like education and infrastructure [doesn’t] go down too fast…”

Further on, he proclaimed his commitment to a “path that will grow the economy faster, put more people back to work, that doesn’t involve massive new federal spending programs…”
In other words, despite his attempt to conjure up a vast difference between his economic policies and those of the Republicans, there is agreement that no serious programs will be enacted to address the deepest social crisis since the Great Depression. On the contrary, what remains of past programs will be slashed further, the differences between his administration and the Republicans boiling down to the small change of timing and tactics.

Obama rules out any significant spending for jobs, health care, housing, education, etc., having allocated trillions to bail out the banks and rescue Chrysler and General Motors with loans stipulating a 50 percent wage cut for newly hired workers. He made sure in his interview to defend the bailout of Wall Street (“We had to make sure the banking system wasn’t collapsing”) even as he foreswore any serious spending to alleviate the social crisis.

9---Chart Of The Day: Monthly Home Payment Soars 40% To 2008 Levels, zero hedge

The following chart from Credit Suisse fully explains why the US housing "recovery" has just ground to a halt: in a few short weeks, US housing affordability (a topic we first covered a month ago) has collapsed as a result of the monthly payment on the median home sold soaring by nearly 40% from under $800 to just shy of $1100, a level not seen since 2008. Now if only US personal incomes would keep pace, instead of doing this...



10---Investor activity to plummet, resale home sales volumes will drop, oc housing

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