- Gold hits fresh highs, taps $1,388.10 on Globex.
- API shows surprise oil inventory decrease of 4 million barrels for the wk ended Oct. 8.
- Asian stocks advance as economic, earnings reports boost recovery optimism.
- Bank of Korea leaves benchmark interest rate unchanged at 2.25%.
- China’s foreign reserves rise by $194B, adding pressure on value of renminbi.
- Dollar was quoted at 81.23 yen- 15-year-low against yen.
- Dubai’s worst office buildings will be empty forever, CBRE says.
- Fed to buy $32B in Treasury debt in next month.
- Foreclosure filings up 3% in September over last month.
RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 14/10/10
Looks like someone may have had a little advance notice on October's foreclosure semi-moratorium festivities. According to RealtyTrac, September foreclosures marked a 5 month high of 347,420, jumping 3% from the previous month and 1% from September 2009, even as the 3rd quarters marked the highest foreclosure activity on record. For the first time in history, bank repossessions (REOs) surpassed 100K, hitting 102,134. Providing some much needed color on what is actually happening in the foreclosure market, James Saccio, CEO of RealtyTrac said: "Lenders foreclosed on a record number of properties in September and in the third quarter, taking a bite out of the backlog of distressed properties where the foreclosure process was delayed by foreclosure prevention efforts over the past 20 months. We expect to see a dip in those bank repossessions — and possibly earlier stages of the foreclosure process — in the fourth quarter as several major lenders have halted foreclosure sales in some states while they review irregularities in foreclosure-processing documentation that has been called into question in recent weeks." And plunge, foreclosure activity will: the 24 judicial foreclosure states most affected by the foreclosure documentation issue accounted for 40 percent of all foreclosure activity in the third quarter and 36 percent of bank repossessions, or REOs. And the worst part is precisely what Jim Cramer thought was going to represent a boost to home prices, confirming just how little the man understand basic market principles: "If the lenders can resolve the documentation issue quickly, then we would expect the temporary lull in foreclosure activity to be followed by a parallel spike in activity as many of the delayed foreclosures move forward in the foreclosure process. However, if the documentation issue cannot be quickly resolved and expands to more lenders we could see a chilling effect on the overall housing market as sales of pre-foreclosure and foreclosed properties, which account for nearly one-third of all sales, dry up and the shadow inventory of distressed properties grows — causing more uncertainty about home prices.” In other words: a complete housing market collapse.
Before we get into the latest bank assessment of fauxclosure, this
time from BofA's Michelle Meyer, we wanted to highlight one point from
today's JPM financial supplement which appears to have evaded pretty
much everyone (perhaps due to its appearance on the last page, and only
lawyers go that far). In today's earning call, Jamie Dimon stated that
the average length a mortgage is delinquent before it is finally
foreclosed upon is 14 months, or 448 days. However, it seems that average
and median in this metric are quite different. To wit, on page 21 of the supplement we read that the average delinquency at foreclosure for Florida is 678 days, while for New York, it is, get ready, 792 days! That's right, a house is delinquent on its payments, which usually means not paying anything, for over two years in New York before it is foreclosed upon. Which
also means that only now are those who stopped paying their mortgage
around the days when Lehman filed being foreclosed upon. And guess
what happened to the economy, and the stock market in the 6 months
immediately after... In other words, there is such a huge cliff of
accrued foreclosures that is supposed to be hitting right about...now,
that the double whammy of foreclosure gate and the accrued foreclosures
will blow right through the balance sheets of banks like JPM. And with
that out of the way, here is why BofA believes that there is a
"heightened risk of a more dismal scenario. If negative momentum in
the housing market kicks in, and feeds into the banking system and
broader economy, it will be hard to fight." Alas, Michelle, it already has.
Buffett's Pet Bank Joins The Fraudclosure Circus: Wells Caught Lying About Affidavit Practices After Clerk Admits She RoboSignedSubmitted by Tyler Durden on 10/13/2010 - 19:42
The last bank, and arguably the one that has the most to lose, Wells Fargo, which up until now has fervently denied it engaged in robosigning and thus refused to halt foreclosures, has just been caught red-handed by the FT. In a sworn deposition, which will certainly lead to a foreclosure halt by Warren Buffett's pet bank, and confirmation that WFC was merely lying like everyone else on Wall Street, the Financial Times has obtained legal documents that prove Wells was merely one of many. Per the FT: "Legal documents obtained by the Financial Times suggest that Wells Fargo, the second-largest US mortgage servicer, also used a “robo signer”. Unlike its rivals, Wells Fargo has not halted foreclosures. The San Francisco-based bank said on Tuesday it was reviewing some pending cases, but it has maintained that it has checks and balances designed to prevent serious procedural lapses." Now that Wells' checks and balances end up neither checking nor balancing, perhaps it is time for Charlie Munger to tell the shareholders of Wells to "suck it in", as the bank is about to be faced with a rather simple dilemma: beg for TARP 2 (and confirm that Munger, and his partner, are nothing but a bunch of pathetic senile hypocrites) and thus more taxpayer bailouts, or see a huge portion of its shareholder value (and thus Charlie Munger's precious, precious money) about to be wiped out.
INCIDENT: The traditional Swiss finishing school taught young women etiquette and social graces, but international bank regulators are talking about something much tougher when they refer to a “Swiss finish” for global banks.
Just how tough became clear last week, 4 October, when a Swiss commission proposed that its two giant banks, UBS and Credit Suisse, be subjected to capital requirements of up to 19%, nearly three times as tough as the 7% capital-to-assets ratio recently suggested by the Basel Banking Committee as a minimum global standard.
Paging Bob Pisani: Mutual Funds See 23rd Sequential Outflow, As Redemptions Accelerate, Hit $80 BillionSubmitted by Tyler Durden on 10/13/2010 - 17:50
Sorry CNBC and Mr. Pisani but there is no way to spin this. ICI has just reported the latest in what is now a weekly farce: nobody wants a piece of this market. Nobody. Retail is out permanently, as was confirmed by the 23rd sequential outflow from domestic equity mutual funds, this time redeeming $5.6 billion, the highest since the beginning of September, right before the Fed full blown stock ramp intervention began. And that brings the total YTD mutual fund redemptions to $80 billion. Sorry bankers - no greater fool, no hot potato. The jig is up. Have fun selling AAPL at $50,000,000 to each other (and of course ENIAC) in subpenny increments. Everyone else will stick to bonds and gold. Lights out.
From Nic Lenoir: "To me this market in general screams deja-vu 2008 all over again. USD is trading very weak, commodities are through the roof, everybody is focused on decoupling, and the ECB is talking hikes when the Fed is in easing mode... You better hope somehow the leading indicators on the ISM are all wrong and it will not go below 45 otherwise... well we all know what happens."
Yesterday, with a modest dose of sarcasm, we pointed out the latest salvo by the fiat regime against gold, in the form of one Op-Ed by Edwin Truman, who very seriously suggested that America should sell all of its gold to plus less then 3% of its massive (and growing) debt hole. Returning the favor of "all seriousness" we said that this is "dumbest idea we have ever heard." Today, Jim Rickards, shares his view on this modest proposal in a far more politically correct manner, via a King World News exclusive. Here are Rickards' follow up thoughts on this most ridiculous suggestion we have heard in all of 2010.
As long noted, the long gold trade continues to outperform stocks. The daily "beta" in gold, as wrong as this statement is, continues to be higher than stocks, with risk assets underperforming gold on a daily basis now, which incidentally closed at a fresh all time high spot level north of $1,370. And yes, gold has far outperformed the stock market rally since September. In short: stocks, priced in gold, are down -0.76% for the day. This is better known as visualizing the Fed's dollar devaluation in relative and absolute terms. With each passing day, the upside in stocks lags the loss in purchasing power. Which is precisely what the Fed is hoping to achieve.
RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 13/10/10
Meet The Foreclosure "Experts": Hair Stylists, Walmart Floor Workers And Assembly Line Workers, All Hired To "Defraud Homeowners"Submitted by Tyler Durden on 10/13/2010 - 15:54
This is just surreal: the Associated Press has put together a must read profile of all the people who the mortgage servicing industry has been scrambling to get together since 2007. The outcome, and stereotypes, are stunning: "In an effort to rush through thousands of home foreclosures since 2007,
financial institutions and their mortgage servicing departments hired
hair stylists, Walmart floor workers and people who had worked on
assembly lines and installed them in "foreclosure expert" jobs with no
formal training, a Florida lawyer says." And it gets even scarier - these "experts" pretty much all confirm they participated in fraud, either willingly or unwillingly: "In depositions released Tuesday, many of those workers testified that
they barely knew what a mortgage was. Some couldn't define the word
"affidavit." Others didn't know what a complaint was, or even what was
meant by personal property. Most troubling, several said they knew they
were lying when they signed the foreclosure affidavits and that they
agreed with the defense lawyers' accusations about document fraud." And here is punchline: " In what is perhaps a
sign of things to come, a Simi Valley, Calif., couple and their nine
children broke into their foreclosed home over the weekend and moved
back in, according to television station KABC of Simi Valley. The family was evicted
from their Spanish-style two-story in July. The home has been sold, and
the new owner was due to move in soon." And this is a problem that will go away in a few months?
Both Bank of America and Wells Fargo are refusing to go with the euphoric melt up flow, at least in stocks, and are now wider by about 13 bps each (latest rerack: BAC 177.5 +13.50; WFC 115.50 +12.5) as investors begin fretting about just how serious foreclosure fraud may be, and its impacts on banks. And yes, this is isolated to foreclosure fraud, as all the other non-originator-cum-servicers are flattish to tighter on the day (oddly, Block is wider by almost 100 bps to 515 from 422.5, and we can't quite explain the reason just yet). As we pointed out earlier, when JPM stock was still up for the day, look for this credit weakness to spill over more into stocks as Fed-frontrunners realize that the Fed, with even a $4 trillion balance sheet, where it will be in a year, will be unable to keep all the moving parts on the banks' $15 trillion liabilities in check (not to mention the $18 trillion in shadow liabilities). Bottom line - very soon foreclosure fraud will finally start to be priced into financials first, then everything else. It already has infected credit.