Sunday, November 24, 2013

Today's Links


1---Credit card debt, The Burning Platform

Wall Street introduced the credit card in 1968.
  • There were 200 million Americans in 1968 and $2 billion of credit card debt outstanding, or $10 per person....
  • By July of 2008 credit card debt outstanding peaked at $1.022 trillion and the population was 304 million, with credit card debt per person topping out at $3,361 per person.
Over the course of 40 years, the population of this country grew by 52%. Credit card debt grew by 51,000%. Credit card debt per person grew by 33,600%. ....
...

Since July 2008 credit card debt has declined by $175 billion... It bottomed out at $834 billion in April 2011 and has only grown by a miniscule $13 billion in the last 29 months, and only $1.7 billion in the last twelve months. The muppets have refused to cooperate by running up those credit cards..... Even a government educated, math challenged, iGadget addicted moron realizes their credit card is the only thing standing between them and living in a cardboard box on a street corner.
 
 
The proposals of the Securities and Exchange Commission on money market fund regulation are a response to continuing vulnerabilities as well as to the run in the fall of 2008. These are important initiatives that will contribute to a safer system of funding throughout the financial system. Yet the risk of contagious runs would persist even in the absence of individually systemic institutions. And with less vulnerable money market funds, other cash-rich entities could emerge as a source of inexpensive funding for the shadow banking system. Finally, as I have noted, the systemic risks associated with short-term wholesale funding in prudentially regulated institutions have not fully been countered by the important capital and liquidity standards adopted since the crisis. My purpose today has been to reinforce the point that a sounder, more stable financial system requires a more comprehensive reform agenda.
 
 
 
 
They don't ring bells at the top, but when a company called Fantex Holdings plans to sell shares in professional athletes and possibly actors and musicians, a chill should race up the spine of investors.
You know this isn't your grandfather's market when a company pushing chicken wings (Buffalo Wild Wings) sells at over 40 times earnings. And when a company that dominates retail but doesn't make any money (Amazon) trades for $350 a share. And when a company that pumps old movies, TV shows, and a sliver of new content to subscribers trades at 280 times earnings (Netflix).
Let's just say that American industry ain't what it used to be.

6------QE: The problem, not the solution, The Coppola Comment

The policy rate has fallen to an all-time low - it has now been fixed at 0.5% since Q2 2009. But that is only just beginning to feed through into the effective interest rate, and the chart indicates that most commercial lending rates remain far above the policy rate. Now, the policy rate is not an absolute indication of the cost of funding for banks - most banks pay slightly above that - but it is certainly an indication that bank funding is pretty cheap at present. Yet commercial borrowers are still paying high rates. This is undoubtedly because of banks' desperate need to repair their balance sheets and build up capital, but it doesn't help the economy.


And note also the effect of QE. This chart does suggest - very strongly - that QE is effective in bringing down real interest rates - but not for borrowers from commercial banks. They are paying as much or more than two years ago. The effective interest rate is depressed because of lower rates paid to

7---The strange world of negative rates, Coppola moment

Banks lend if they choose to - if the balance of risk versus return works in their favour. If it doesn't, no amount of reserves will make them lend. They will hoard money instead. And the fact is that the balance of risk versus return at the moment is so horrible that banks do not wish to lend except to the most creditworthy borrowers. Banks are seriously damaged and very, very scared of losses: they are already carrying high levels of risky loans against which they have insufficient loss-absorbing capital, and governments are withdrawing the implicit guarantee that enables them to maintain risky lending against insufficient capital. And the world is a risky place for banks at the moment....and creditworthy borrowers are thin on the ground everywhere due to damaged household and corporate balance sheets.
Not only that, but there is evidence that creditworthy households and corporates don't want to borrow, either. Borrowing and spending is out of fashion, saving and thrift is in."


8---Shiller warns of Bubbles, WSJ

Stocks have risen more than 20% this year and are up roughly 164% from their 2009 low. Investors have been bidding up prices for technology and social-media company initial public offerings, such as Twitter Inc. But at the same time, corporate earnings growth has been slowing and there are worries that the stock market's gains have been fueled mainly by easy-money policies from the Federal Reserve.
The result has been rising concern among some market watchers that stocks are being lifted by a potentially dangerous bubble, with Shiller's index seen as one of the early warning signs.
 
 
The nation’s foreclosure inventory has contracted for 18 consecutive months and is now at its lowest point since the end of 2008, totaling 1.28 million loans, or just 2.54 percent of today’s active mortgages, according to Lender Processing Services (LPS).

The company’s latest report assessing loan-level data on the performance of mortgage assets through the end of October shows the industry’s foreclosure inventory rate is down 29.61 percent from last year. Through the first 10 months of 2013, the foreclosure inventory rate has plummeted 26 percent.
Delinquencies dropped 2.8 percent month-over-month in October to come in at a rate of 6.28 percent. LPS says while that’s not as low as the delinquency rates recorded

 earlier this year—in August the rate was 6.20 percent and in May it settled in at 6.08 percent—it’s still headed in the right direction. Compared to last year, the rate of mortgages 30-plus days delinquent is down 10.69 percent.
Nationwide, there are 3,152,000 properties with mortgages 30 or more days past due; 1,283,000 of those are 90 or more days delinquent but not in foreclosure. Add to that the 1,276,000 loans that are part of the pre-sale foreclosure inventory, and there are 4,427,000 non-current home mortgages in the United States, by LPS’ assessment.

10---4,427,000 non-current home mortgages in the United States, DS News

Compared to last year, the rate of mortgages 30-plus days delinquent is down 10.69 percent.
Nationwide, there are 3,152,000 properties with mortgages 30 or more days past due; 1,283,000 of those are 90 or more days delinquent but not in foreclosure. Add to that the 1,276,000 loans that are part of the pre-sale foreclosure inventory, and there are 4,427,000 non-current home mortgages in the United States, by LPS’ assessment.

11---More inventory manipulation in housing, Dr housing Bubble

Crazy!







 


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