30 Year Mortgage
The 30 Year U.S. Treasury bond yield hit 2.35% yesterday. Long term interest rates are not controlled by Yellen. They reflect the economic prospects of the country. When they are rising it means the economy is doing well. When they are plummeting to all time lows, the economy is either in recession or headed into recession. Take your pick. No amount of government data manipulation, feel good propaganda spewed by the captured mainstream media, or Ivy League educated Wall Street economist doublespeak, can change the fact this economy is in the dumper and headed much lower. The Greater Depression is resuming its downward march toward inevitable war.
Since the entire developed world is insolvent (don't believe us, believe Paul Singer), it was only a matter of time before this percolating English idea moved across the big pond: this we warned about also when we said that "if anyone is still confused, the IMF-proposed "mansion tax" is most certainly coming to the US, and every other insolvent "developed world" nation, next." Today we learn that we were right about this too. The Post reports that "After his failed attempt to hike income taxes on the wealthy, Mayor de Blasio is eyeing another way to squeeze money from millionaires to fund another top priority: affordable housing. Multiple sources tell The Post that the mayor is talking to people about how to increase the so-called “mansion tax” on homes selling for $1 million or more to help offset the cost of adding 200,000 affordable-housing units."
The reasons to hold gold (and silver), and we mean physical bullion, are pretty straightforward. So let’s begin with the primary ones:
- To protect against monetary recklessness
- As insulation against fiscal foolishness
- As insurance against the possibility of a major calamity in the banking/financial system
- For the embedded 'option value' that will pay out handsomely if gold is re-monetized
The punch line is this: Gold (and silver) is not in bubble territory, and its largest gains remain yet to be realized; especially if current monetary, fiscal, and fundamental supply-and-demand trends remain in play.
This is Washington, where nothing makes sense.
One could see this one coming from a mile away.
"Property taxes are equitable and efficient, but underutilized in many economies. The average yield of property taxes in 65 economies (for which data are available) in the 2000s was around 1 percent of GDP, but in developing economies it averages only half of that (Bahl and Martínez-Vázquez, 2008). There is considerable scope to exploit this tax more fully, both as a revenue source and as a redistributive instrument, although effective implementation will require a sizable investment in administrative infrastructure, particularly in developing economies (Norregaard, 2013)." - IMF
The divergence between the NAHB index and other housing indicators has continued to suggest that sentiment was “getting ahead of itself" and as Citi's Tom Fitzpatrick warns would suggest that the qualitative nature of the overall housing recovery is less robust than one would like. Housing should pause/consolidate possibly even for most of this year as the weather argument that is trotted out by so many commentators does not seem to hold up to even a basic examination with the worst data coming from the West Coast. Simply put, Citi warns, we think housing sentiment got carried away as it did into 1994 and 1998 post the housing/savings and loan crisis of 1989-1991.
Reality will reassert itself in 2014, with lemmings, flippers, and hedgies getting slaughtered as the housing market comes back to earth with a thud. The continued tapering by the Fed will remove the marginal dollars used by Wall Street to fund this housing Ponzi. The Wall Street lemmings all follow the same MBA created financial models. They will all attempt to exit the market simultaneously when their models all say sell. If the economy improves, interest rates will rise and kill the housing market. If the economy tanks, the stock market will plunge, creating fear and killing the housing market. Once it becomes clear that prices have begun to fall, the flippers will panic and start dumping, exacerbating the price declines. This scenario never grows old.
The Fed's announcement Wednesday to begin the tapering of its bond buying program (to our surprise) has been followed by a spike in the US 10 year yield; however, Citi's FX Technical group cannot help but feel that we have seen this dynamic play out before.
This artificial prosperity plan for Wall Street has the added benefit of allowing the captured politicians in Washington D.C. to continue their $1 trillion per year deficit spending with no consequences for their squandering of future generations’ wealth. Bernanke and Yellen will never taper, because they can’t. The Fed balance sheet will continue to grow by at least $1 trillion per year until they crash the financial system again. Except this time, there will be no money printing solution. We are all trapped like rats in this monetary experiment being conducted by evil mad scientists. No one will get out alive. Welcome to the new normal. Now eat your cheese.
Who Is Going To Buy The US Debt If This War Causes China, Russia And The Rest Of The World To Turn On Us?Submitted by Tyler Durden on 09/07/2013 14:51 -0500
Yesterday we implied a difficult question when we illustrated the huge size of US Treasury bond holdings that China and Russia have between them - accounting for 25% of all foreign held debt - implicitly funding US standards of living (along with the Federal Reserve). The difficult question is "Can the U.S. really afford to greatly anger the rest of the world when they are the ones that are paying our bills?" What is going to happen if China, Russia and many other large nations stop buying our debt and start rapidly dumping U.S. debt that they already own? If the United States is not very careful, it is going to pay a tremendous economic price for taking military action in Syria.
There are very few segments of the U.S. economy that are more heavily affected by interest rates than the real estate market is. When mortgage rates reached all-time low levels late last year, it fueled a little "mini-bubble" in housing which was greatly celebrated by the mainstream media. Unfortunately, the tide is now turning.
After everything that Barack Obama, the U.S. Congress and the Federal Reserve have tried to do, there has been no real economic recovery and now the U.S. economy is suddenly behaving as if it is 2009 all over again. A whole host of recent surveys indicate that the American people are starting to feel a bit better about the economy, but the underlying economic numbers tell an entirely different story. If we were going to have an "economic recovery", it should have happened in 2010, 2011 and 2012. Now we are rapidly approaching another major economic downturn.
In almost every asset class, volatility has made a phoenix-like return in the last few days/weeks and while equity markets tumbled Friday into month-end, the bigger context is still up, up, and away (and down and down for bonds). From disinflationary signals to emerging market outflows and from fixed income market developments to margin, leverage, and valuations, here is the 'you are here' map for the month ahead.
Is a $400,000 house with NINJA loan normal? How about a $200,000 REO with missing appliances, a dead yard, a long list of maintenance and no financing? Maybe normal is a $300,000 flip after the flipper fixed everything and colored up the yard, and did some upgrades to the interior. Some may suggest that normal is more like a $300,000 sale with a 5.5% fixed rate and 20% down. Then again, it may be more normal if this $300,000 sale is financed with a 3.5% down FHA loan at 4%. Of course, all of the above is actually referring to the same house. So what is normal? At the moment, we know prices are going up in certain markets, and so are sales. Mortgage rates are higher now than when QE3 started in September 2012. Investors are gobbling up everything in sight in their favored target markets. As an example, they are buying 30% of the houses in Southern California, 38% in Phoenix and 53% in Vegas. First time buyers do not stand a chance. The percentage of home ownership is declining. Are policy makers happy with these results? Are these intended or unintended consequences of public policies?