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“Wave Of Disaster” Threatens U.S. Mortgage Market

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Today’s AM fix was USD 1,250.75, EUR 919.80 and GBP 767.99 per ounce.
Yesterday’s AM fix was USD 1,250.75, EUR 923.88 and GBP 773.69 per ounce.

Gold fell $6.70 or 0.54% yesterday, closing at $1,242.10/oz. Silver slid $0.17 or 0.85% closing at $19.85/oz. Platinum fell $16.94 or 1.2% to $1,367.30/oz, while palladium dropped $3.25 or 0.5% to $715.47/oz.

Gold is higher today in London. There is speculation that lower prices, which fell to a four-month low, will lead to increased physical demand. Prices fell to $1,225.55/oz on Monday after another massive sell order led to trading being suspended for 20 seconds for the third time in less than a week. $1,225.55/oz was the lowest since July 8.


S&P/Case-Shiller Composite-20 Home Price Index Not Seasonally Adjusted

The German regulator has joined the British Financial Regulator and is opening up an examination of the gold and silver price ‘setting’ at banks.

The German financial markets regulator is scrutinizing gold and silver price setting operations at individual banks alongside other benchmark processes including Libor and Euribor, Bafin spokesman Ben Fischer told media. Bafin declined to elaborate on the status of the investigation or the banks involved.

Despite the very poor sentiment after recent price falls, gold's fundamentals are actually quite sound.

Global physical demand is set to be very high again this year and may even reach a new record, despite the 25% price fall.

This is especially the case, as Chinese demand is set to be a new record this year despite the recent slight decline in demand. China’s net imports of gold from Hong Kong alone in October reached the second-highest level on record last month. This does not include direct imports from Australia, Africa, Vietnam and other countries.

Indeed, Chinese demand this year looks set to be a new record for the highest gold demand from one country in one year ever. It is important to look at the aggregate annual demand figures rather than the ebb and flows of weekly and monthly data which can mislead.

Momentum and technical traders are dominant at the moment and with the short term trend down, gold may incur further losses in the short term.

However, the smart money is gradually accumulating on the dips. Dollar cost averaging remains prudent for investors who wish to get exposure to bullion but are concerned about further price falls.


Gold in US Dollars - 5 Year

U.S. borrowers are increasingly missing payments on home equity lines of credit they took out during the housing bubble, a trend that could deal another blow to the country's biggest banks according to Reuters Insight.

It would likely also deal another blow to the U.S. property market and the fragile U.S. economy.

Bank of America, JP Morgan and Wells Fargo appear to be the most exposed - meaning that either taxpayers will again be asked to bail out banks or more likely the new bail-in regime will confiscate cash from depositors.

From Reuters:
The loans are a problem now because an increasing number are hitting their 10-year anniversary, at which point borrowers usually must start paying down the principal on the loans as well as the interest they had been paying all along.

More than $221 billion of these loans at the largest banks will hit this mark over the next four years, about 40 percent of the home equity lines of credit now outstanding.

For a typical consumer, that shift can translate to their monthly payment more than tripling, a particular burden for the subprime borrowers that often took out these loans. And payments will rise further when the Federal Reserve starts to hike rates, because the loans usually carry floating interest rates.

At a conference last month in Washington, DC, Amy Crews Cutts, the chief economist at consumer credit agency Equifax, told mortgage bankers that an increase in tens of thousands of homeowners' monthly payments on these home equity lines is a pending "wave of disaster".
In terms of loan losses, "What we've seen so far is the tip of the iceberg. It's relatively low in relation to what's coming," Equifax's Crews Cuts said.


UK Nationwide House Price Index - 1971 - Today

There are concerns about Britain’s property market too and the Organisation for Economic Co-operation and Development (OECD) warned of a UK property bubble last week.

The Paris-based group said, in its semi-annual Economic Outlook, that it was urgent to continue to relax the barriers to housing supply to prevent overheating in the property market. It ignored the fact that the nascent new bubble is in a large part due to near zero percent interest rates leading to renewed property speculation by buy to let investors.

The UK government’s Help to Buy program that aids buyers with smaller deposits has been criticized by the International Monetary Fund and politicians for potentially stoking a property bubble as it boosts demand.

Given the very fragile recovery, despite near zero percent interest rates in the UK and the U.S. and the uncertain international backdrop, property prices in both countries look vulnerable.

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Thu, 11/28/2013 - 12:22 | 4196778 dunce
dunce's picture

I read that the government is likely to extract extort another 50 to 100 billion$ from the banks for mismanaging mortgages. Which raises the question of where does that money go? It will "not" go to the people that were foreclosed on. It will not go to the FDIC to shore up their balance sheet. Money is fungible so just what will the government squander it on? Another Solyndra, battery company, electric car maker, or voter registration booths at our southern border.

Thu, 11/28/2013 - 11:57 | 4196690 buttmint
buttmint's picture

...looks like we will be renting from Sachs, JP Morgan, WellsFargo and paying rent with FED EBT cards.

Currency will disappear.

Thu, 11/28/2013 - 11:12 | 4196560 mess nonster
mess nonster's picture

whatevah.. are there any subprime borrowers left? Oh yeah... me.

Thu, 11/28/2013 - 09:45 | 4196382 Quaderratic Probing
Quaderratic Probing's picture

" meaning that either taxpayers will again be asked to bail out banks or more likely the new bail-in regime will confiscate cash from depositors."

Any bank that does this might as well just close, bank run will kill it. Remember the Govt covered all accounts last time to stop people with more than 250K from pulling their money.

Would you put your money in Cyprus, Has any one put money in Cyprus since they conficated?

Thu, 11/28/2013 - 10:50 | 4196505 max2205
max2205's picture

It wong take much next time....no interest....high risk of bail in....cash is trash but its all we got at this point

 

When holding cash is riskier than anything else it says something

Wed, 11/27/2013 - 17:59 | 4195020 PoliticalRefuge...
PoliticalRefugeefromCalif.'s picture

To a potato farmer the obvious answer to any problem is to plant potatoes, of course this is a great time to buy!!

There were a lot of for sale signs going up like mushrooms in cow shit in my upper middle class community in the Phoenix area last Summer, mostly for rent signs now and from the looks such as no one cleaning the front yards I would say they are in the process of walking off, maybe after the holidays..

I would love to sell but without mortgages being serviced.....

Jobless housing recovery - why not?

Wed, 11/27/2013 - 17:53 | 4194999 SmittyinLA
SmittyinLA's picture

more like wave of reality.

who would bet against the baby boomer liquidation and die off?

What other possible outcomes are there? 

 

You can't replace 60 million Americans with Mexicans, all you get is 60 million Mexicans 

Thu, 11/28/2013 - 09:02 | 4196347 rationaldemocracy
rationaldemocracy's picture

 We we are going to try and let me tell you I can't wait till your face is red from from the realization that the Mexicans will be the new middle class of America.

 

Thu, 11/28/2013 - 11:18 | 4196576 optimator
optimator's picture

And we'll be the new minority waiting in line for everything we paid for, waiting in line behind them.

Thu, 11/28/2013 - 10:00 | 4196403 algol_dog
algol_dog's picture

Are you kidding ... Mexicans ARE the new American middle class. In the mean time, entertain yourself watching white trash continue their descent into obscurity. If the Republicans think their base of old white rich men is sustainable, I'd say good luck with that.

Thu, 11/28/2013 - 09:26 | 4196363 Haloween1
Haloween1's picture

Having worked in Mexico for many years as an expat, and travelled throughtout that country, I have personally witnessed the poverty, filth and corruption that is Mexican society.  If that's what coming to this country, like you say, then  I'm glad to be one of those Boomers heading out the back door before it gets here.

 

Thu, 11/28/2013 - 10:09 | 4196398 DanDaley
DanDaley's picture

I have a friend from Mexico who is civil engineer with an MA and 6-sigma...he won't go near Mexico for the reasons you mention (when he used to go to visit Monterrey, Mexico, he never left home without at least $100 in his pocket so as to pay off the cops for the eventual traffic stop).

Nobody wants to live like that, but rather are led into it over decades by statists who purport to have all the answers, but who in reality give you Detroit, Memphis, and Chicago.

Thu, 11/28/2013 - 11:46 | 4196651 Accounting101
Accounting101's picture

Well, I'm certainly glad you have it all figured out Dan. The statists can't fool you. Lets dispense all the bullshit shall we? I live in a suburb of Detroit, and I head downtown often and somehow, I always manage to get home alive. Yes, the financials are in rough shape, but it isn't hell on earth.

Today, 50,000 Lions fans will head down to see the annual Thanksgiving game, after which many will pour into the bars and restaurants surrounding Ford Field. Oh, and I forgot the other tens of thousands lining up on Woodward Avenue to watch the Thanksgiving Day parade. All those wonderful people will make it back home safe and sound.

Context always matters.

Thu, 11/28/2013 - 14:32 | 4197221 DanDaley
DanDaley's picture

I'm happy for you that you are alive and have a job, however some rather plain statistics point to another side of Detroit that you perhaps are not acquatinted with, namely, the No.1 murder city in the US in 2012:

 

http://www.forbes.com/sites/danielfisher/2012/10/18/detroit-tops-the-201...

 

Interesting how all of these major murder cities are, and have been, run by liberals (read: statists / Democrats) for generations, don't you think?

Thu, 11/28/2013 - 09:45 | 4196383 rationaldemocracy
rationaldemocracy's picture

I don't think so, once they get citizenship they will transform into Americans I've seen it happen all the time..they just need a chance

Thu, 11/28/2013 - 11:21 | 4196586 hootowl
hootowl's picture

What?.....Kinda like the blacks have transformed into Americans in the last 300 years????

Good luck with that.

Thu, 11/28/2013 - 10:35 | 4196465 DanDaley
DanDaley's picture

The problem with that is that most people who come here think that what we have now is normal, and can't comprehend how far we've fallen.  For example, if you come from a country where it is against the law to own any type of firearm (and almost all countries have insane laws against firearm ownership and use -and people are not coming here from New Zealand, BTW), how can you imagine that it is worth fighting for that right? They can't; they just accept the status quo which is increasingly the statist's position, sad to say.  Lots of education needed, for them and for us.

Thu, 11/28/2013 - 09:37 | 4196375 rationaldemocracy
rationaldemocracy's picture

I don't think you are a bad person but your boomer mentality of "if I am going down then so should everyone else" is one of the reasons why I think this country is in the state it is.

Wed, 11/27/2013 - 14:46 | 4194253 ebworthen
ebworthen's picture

$221 Billion?

That's less than 3 months of QE.

The banks will be made whole by a keystroke or two from the FED.

The houses will be confiscated and given to the banks and sold to Chinese investors or to Blackrock to rent out or shove into shadow inventory.

Break a window!

Wed, 11/27/2013 - 14:54 | 4194281 Colonel Klink
Colonel Klink's picture

85 billion here, 85 billion there, eventually you're talking about real fiat toilet paper.

Stay ignorant my friend! (directed towards the sheeple)

Wed, 11/27/2013 - 16:48 | 4194760 I am Jobe
I am Jobe's picture

So many commercials still saying the best time to buy in TX. Yikes, wrtf 

Thu, 11/28/2013 - 12:04 | 4196715 plane jain
plane jain's picture

Real estate is still local.  I would buy in Texas before most other places.

http://content.time.com/time/magazine/article/0,9171,2154995,00.html

I was born in DFW.  Miserable traffic and congestion now.  Just left this past September and no desire to be in such a big city again.

Wed, 11/27/2013 - 14:27 | 4194196 Hongcha
Hongcha's picture

AngelEyes, good for you.  I did something similar; locked up our cash in a 1-year CD and that kept us from chasing a condo in some windswept corridor of Emeryville.  Our Concord foursquare middleclass house was up 35% within this year.  

We got priced out in a few months because we resolved not to buy anything with another mortgage.

US RE is not a healthy market.  It is not a recovering market.  It is a spiked, punchdrunk market.

It must be understood that, if you give a terminal patient a shot of methamphetamine and he jumps out of bed and starts painting the room and doing jumping jacks, this is not a sign of health.

I may be wrong for 1-2 more years but, to borrow from Goethe, mortgages are long and manias are brief and I say we have a multi-headed mania rolling in a few select areas of the country.

Other than those areas, flyover USA is long mayo sandwiches and gubmint cheese.

Wed, 11/27/2013 - 14:06 | 4194162 Colonel Klink
Colonel Klink's picture

Just like the tide going out just before the Tsunami hits.

Wed, 11/27/2013 - 14:03 | 4194155 AngelEyes00
AngelEyes00's picture

My wife and I thought about buying a 2nd home for her business down the street while market prices were rising, but my knowledge of QE made me hesitant and we decided against it.  Oh my I'm glad we didn't buy because the market has died in our area in the just the last 3 months.  Prices stabilized but appear to have downward pressure.

That was fast!  To go from real estate being so highly valued we couldn't find a decent piece of land at a reasonable price, to the mortgage meltdown, then finally it starts to rise again only to start to deflate again says heapsful about the condition of the economy.  Even super low rates don't seem to make much of a difference.  What we have here is a debt bubble that is going to burst at some point.

Wed, 11/27/2013 - 15:55 | 4194540 CheapBastard
CheapBastard's picture

I see the same downturn Angel. For some reason there are dozens of houses For Rent and/or For Sale popping up through the neighborhood even though it's the worse time of the year [winter] to sell a house.

Thu, 11/28/2013 - 12:25 | 4196784 quasimodo
quasimodo's picture

No downturn here in the tristate area(IA, SD, MN). It's nucking futs what homes, tillable land is bringing. I keep telling myself we are heading right into what happened back in the early 80's when many farmers and business owners went belly up when interest rates got a huge erection. 

I try to talk to others about this and you would think I had a scarlet W across my chest, or they ask me if I am "one of those".

One example being Sioux Falls, SD. I had not been on a particular stretch of road from early spring until yesterday near the city as it was closed for construction. While we came up to the intersection I had a WTF moment as there was an entire suburb of homes that were not there less than a year ago, I honestly thought I was dreaming for a split second.

And all I hear from the other half is how poor an investment metals have been, seriously thinking about throwing in the towel and joining the grand illusion some days.

Wed, 11/27/2013 - 13:57 | 4194140 Moe Hamhead
Moe Hamhead's picture

A mortgage !  What's that ?

Wed, 11/27/2013 - 13:48 | 4194123 ItsDanger
ItsDanger's picture

This time they will just buy their worthless assets for bloated prices instead of a 'bailout'.   a bailout spread over time (QE).

Wed, 11/27/2013 - 13:47 | 4194122 TideFighter
TideFighter's picture

Amy Crews-Cutts; the hyphen indicates a marriage, Cutts likely being female. In keeping with bullydike cabinet members and high profile bushbumpers. 

Wed, 11/27/2013 - 14:10 | 4194167 Larry Dallas
Larry Dallas's picture

She's a vagitarian...

Wed, 11/27/2013 - 13:20 | 4194039 csmith
csmith's picture

Amy Crews Cutts???

YGTBFKM

Wed, 11/27/2013 - 13:17 | 4194037 I am Jobe
I am Jobe's picture

Amerikan's are resilent . Nothing will stop them from achieving their dreams including falling home prices or no jobs. 

Everthing will be provided soon

Wed, 11/27/2013 - 14:11 | 4194169 0b1knob
0b1knob's picture

"When a man has nothing to lose he will always lose it."   Yogi Berra

Wed, 11/27/2013 - 15:53 | 4194523 CheapBastard
CheapBastard's picture

"Just walk away."

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