The Phoenix housing market has a special place in the heart of housing bubble watchers: together with Las Vegas and various California MSAs, this is the place where the last housing bubble was born and subsequently died a gruesome death which nearly brought down the entire financial system. Which is why the monthly WP Carey report on the Greater Phoenix Housing Market is of peculiar interest for those who want to catch a leading glimpse into the overall state of the bubble US housing market. As hoped, this month's letter does not disappoint. What we find is that while equilibrium prices have been largely flat month over month, and are up 6% on an average square foot basis from a year ago, something very bad is happening with a key component of the pricing calculation: demand has fallen off a cliff.
This is a big deal. On the heels of our pointing out the surge in Treasury fails (following extensive detailing of the market's massive collateral shortage at the hands of the unmerciful Fed's buying programs), various 'strategists' wrote thinly-veiled attempts to calm market concerns that the repo market (the glue that holds risk assets together) was FUBAR. Even the Fed itself sent missives opining that their cunning Reverse-Repo facility would solve the problems and everyone should go back to the important business of BTFATHing... They are wrong - all of them - as yet again the Fed shows its ignorance of how the world works (just as it did in 2007/8 with the same shadow markets). As JPMorgan warns (not some tin-foil-hat-wearing blogger with an ax to grind) "the Fed’s reverse repo facility does little to alleviate the UST scarcity induced by the Federal Reserves’ QE programs coupled with a declining government deficit." The end result, they note, is "higher susceptibility of the repo market to collateral shortages" and thus dramatically higher financial fragility - the opposite of what the Fed 'hopes' for.
- Carl Icahn says 'time to be cautious' on U.S. stocks (Reuters)
- Banco Espirito Santo Lifts Lid on Exposure to Group (BBG)
- Slowing Customer Traffic Worries U.S. Retailers (WSJ)
- Insurgents enter military base northeast of Baghdad (Reuters)
- Obama tells Israel U.S. ready to help end hostilities (Reuters)
- Japan economics minister warns of premature QE exit, sees room for more easing (Reuters)
- Greek Banks See Quadrupling of Housing Loans by Next Year (BBG) ... to fund buybacks like in the US?
- Piggy Banks Being Raided Signal Swedish Housing Dilemma (BBG)
- London Seeks New Spenders as Russians Skip $719 Champagne (BBG)
- U.S. sets new import duties on Chinese solar products (Reuters)
- U.S.-China Solar-Products Dispute Heats Up (WSJ)
- China Mulls Offshore Yuan Gold Trade in Free Trade Zone (BBG)
- Insider-Trading Probe Could Snarl a Deal for Icahn (WSJ)
- KCG Holdings Suspects Its Trading Code Was Stolen (WSJ)
- ‘Period. Full Stop’ Is the New ‘At the End of the Day’ (BBG)
- Draghi not so goof for bonds: Investors Flag Risk of ECB Disappointing After Europe Bond Rally (BBG)
- But great for stocks: Equity Traders See Draghi Turning Throttle Up on Rally (BBG)
After the crisis, many expected that the blameworthy would be punished or at the least be required to return their ill-gotten gains—but they weren’t, and they didn’t. Many thought that those who were injured would be made whole, but most weren’t. And many hoped that there would be a restoration of the financial safety rules to ensure that industry leaders could no longer gamble the equity of their firms to the point of ruin. This didn’t happen, but it’s not too late. It is useful, then, to identify the persistent myths about the causes of the financial crisis and the resulting Dodd-Frank reform legislation and related implementation...."Plenty of people saw it coming, and said so. The problem wasn’t seeing, it was listening."
More than half a decade after the collapse, and with talking heads proclaiming the recovery as strong as ever and the Fed remarking on the housing market's foundational pillar to that recovery, BlackRock's CEO Larry Fink has a few words of warning for the exuberant - the US housing market is "structurally more unsound" today that before the last financial crisis. As the data comes in weaker and weaker, despite hopes for a post-weather bounce, the fact that the US housing market is "more dependent on Fannie and Freddie than we were before the crisis," is a problem for the US taxpayer and - unlike Mel Watt's 'free credit for everyone' approach to expanding the GSE's role, Fink says with strong underwriting standards, ownership of affordable homes can again become a foundation for American families. So Watt's easy 'Subprime 2.0' or Fink's hard 'American Dream'.
- Bank of England sees 'no housing bubble' (Independent)
- ‘If the euro falls, Europe falls’ (FT)
- India's pro-business Modi storms to historic election win (Reuters)
- Global Growth Worries Climb (WSJ)
- Bitcoin Foundation hit by resignations over new director (Reuters)
- Blackstone Goes All In After the Flop (WSJ)
- SAC's Steinberg loses bid for insider trading acquittal (Reuters)
- Beats Satan: Republicans Paint Reid as Bogeyman in 2014 Senate Races (BBG)
- Tech Firms, Small Startups Object to Paying for Internet 'Fast Lanes' (WSJ) - but they just provide liquidity
- U.S. Warns Russia of Sanctions as Ukraine Troops Advance (BBG)
- Major U.S. hedge funds sold 'momentum' Internet names in first-quarter (Reuters)
In his first major speech since The White House got their 'flexible' man in to manage the GSEs, Mel Watt outlined his strategic plan for Fannie Mae and Freddie Mac. Predicated on the maintenance of liquidity, competition, and resilience of the national housing finance market, Watt's remarkably blind to the past proposal will, as CNBC's Rick Santelli warns, create Subprime 2.0. Easing lending standards, not lowering limits, and raising the possibility of principal reduction seems to do anything but reduce taxpayer risk and merely creates more perverse incentives. Santelli steams, as the orthodox monetary policy channel of the last 30 years continues to be pumped ever higher, "immense fiscal and monetary stimulus has gotten us nowhere." As we suspect Rich might have concluded... Watt the fuck!? "if you believe any of this, you have to be crazy after what we've been through."
- Vietnam mobs set fire to foreign factories in anti-China riots (Reuters)
- Recession-Baby Millennials Scarred by U.S. Downturn Spurn Stocks (BBG)
- U.S. Agents Start Hunting for Sanctioned Russians’ ‘Shiny Toys’ (BBG)
- Russia moves to oust US from International Space Station (FT)
- China Central Bank Calls for Faster Home Lending in Slump (BBG)
- Geithner Must Give S&P Documents in U.S. Fraud Suit (BBG)
- Samsung's 'crown prince' in focus as father hospitalized (Reuters)
- Yahoo buys mobile 'self-destruct' messaging app Blink only to shut it down (Reuters)
- Goldman’s Twitter banker joins hedge fund (FT)
- Keyword being "unexpectedly": Sony Unexpectedly Forecasts Loss Amid PC Restructuring Costs (BBG)
When it comes to the San Francisco Fed, it is best known throughout the financial community as the group of crack economists who spend millions of taxpayer funds to investigate such probing, for kindergarteners at least, topics as: is water wet, do trees make a sound when they fall in the forest, is it still worth going to college, and are hedge funds important in a crisis. Little did we know that, at least some of them, are homicidal psychopaths with suicidal tendencies. Because this is precisely what was revealed moments ago when Bloomberg reported that the chief operating officer of the Federal Housing Finance Agency and 26-year San Fran Fed veteran, Richard Hornsby, is facing a felony charge for threatening to kill the agency’s former top official, Ed DeMarco, and then kill himself.
We can’t say this is surprising. After all, with average peasants, we mean citizens, now priced out of the domestic housing market (Zillow recently showed 1 in 3 homes are unaffordable) due to billionaire financiers and foreign oligarchs buying up all real estate in cash purchases, American serfs now will find out where the “elites” think they belong. In trailer homes, naturally. Oh, but the story gets better, a lot better. As is generally the case in the USSA these days, crony capitalist oligarchs have perfectly positioned themselves to benefit financially from the final transition of Americans to neo-feudalism.
Deja Vu All Over Again: Fannie, Freddie Would Need Another $190 Billion Bailout When Things Go SouthSubmitted by Tyler Durden on 04/30/2014 11:43 -0400
While it will come as a surprise to exactly nobody, certainly nobody who understand that the US financial system is no better financial shape than just before the Lehman crash as nothing has been fixed and everything that is broken has been merely swept under the rug (for details see Paul Singer's explanation posted last night) of epic-er leverage, the news that when (not if) the US economy succumbs to a severe economic downturn Fannie and Freddie would require another taxpayer funded bailout, one of $190 billion or even more than the first $187.5 billion-funded nationalization of the GSEs, can only bring a smile to one's face.
This pattern played out in 1907, 1929, 1987, 2000 and most recently in 2008.
Most Buy Side managers have no idea about the disparate business models of the four largest US banks by assets.
It was so fitting that Obama sauntered into the Rose Garden on April Fools day to proclaim the wonderful success of Obamacare. We are the fools for allowing this fool and his fellow fools in Congress to further bankrupt our country with this disastrous government run clusterf*ck. Their is so much propaganda, spin, disinformation and outright lies circulating in the captured mainstream media that the dumbed down, distracted, disinterested American populace believe the sound bites from Obama and the talking heads on MSNBC and the rest of the Obama loving media. You may have noticed the non-stop 30 second ads trying to convince iGadget addicted morons to sign up for Obamacare over the last three months, building to a crescendo in the last few weeks. Let’s assess the tremendous success the Savior was blustering about yesterday. He sold the plan to the American public back in 2009 with a number of promises.