2012 February 07 | timiacono.com

Stockman on the Latest Bank Bailout Proposal

Former Reagan Administration budget director David Stockman doesn’t seem to think too much of the Obama Administration’s proposal to refinance underwater homeowners at up to 140 percent loan-to-value and he shared his views at The Daily Ticker.

Says Stockman:

This is ultimately, at the end of the day, a bailout for JP Morgan and Wells Fargo. They’re the big writers of second mortgages and home equity lines. Those – and there’s two or three or four hundred billion dollars in the top three or four banks – are in great jeopardy in the case of of homeowners who have mortgages, that are primary mortgages, that are way under water on primary mortgages and are likely to default or throw in the keys at some point down the road.

Good point…

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Tantalizing Housing Market Bottom Calls

While the debate about whether the U.S. housing market has hit bottom is certainly heating up, hopefully it won’t rise to the current temperature of the brouhaha over whether last Friday’s labor market report was good, bad, indifferent, or just an outright fabrication by the Obama administration in an increasingly contentious election year.

I don’t know about you, but I can’t tell the politics from the statistics when trying to make sense of  last Friday’s monthly jobs report and, at this point, I don’t care anymore.

As for the housing market, none other than Bill McBride at the wildly popular Calculated Risk blog weighed in on the subject yesterday declaring The Housing Bottom Is Here, a view that you find out at the end of the article isn’t quite as strongly held as you might think from just reading the title.

Bill notes there are two housing markets – new home construction and existing home sales – and, while the former has clearly made a bottom, the latter is likely to do so next month, though he qualifies that prediction with words like “I think that house prices are close to a bottom” and there being “a reasonable chance that the bottom is here”.

Now, caveats notwithstanding, this is still a big deal since Calculated Risk isn’t just an ordinary offering out there in the blogosphere. This particular blog happened to be calling the US housing market a bubble back when few had an inkling of the trouble to come and, for that reason alone, his is an opinion worth listening to.


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Hedge Funds Bounce Back in 2012

Reuters reports that it’s been a good first month of the year for hedge funds as last year’s losers are turning into this year’s winners following the reversal of the late-2011 decline in early-2012. Even John Paulson seems to be doing well lately, his Advantage Plus Fund already up 5 percent this year after tumbling more than 50 percent last year.

This graphic from the Economist’s Daily Chart depicts how trying it’s been recently, particularly last year when many investors were probably wondering why they were paying big fees to hedge fund managers who underperformed a low cost stock index fund.

Interestingly, according to the Reuters story, after plunging 42 percent last year, the $116 million Henderson European Absolute Return fund claims the top spot in performance this year with a gain of 14 percent through late-January. This compares to a gain of almost 12 percent for the Iacono Research model portfolio so far in 2012 after a decline of 5 percent last year, the same as the average hedge fund performance in 2011.

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Tuesday Morning Links

The Housing Bottom is Here – Calculated Risk
Forty States Sign On to ‘Robo’ Settlement – CNBC
Debt crisis and Greek debt talks: live – Telegraph
Greece exit would not end euro, says EU commissioner – BBC
Citigroup: Risk of Greek Exit From Euro Has Risen to 50% – WSJ
Bernanke testimoney likely to back low-rate stance – Washington Post
Europe’s Banks Reluctant to Lend to Companies in Need of Cash – DealBook
Study links low intelligence with right-wing beliefs – Globe & Mail
To Rush Limbaugh: A Lesson in Seasonal Adjustments – Bondad Blob
Never Mind the Tax Cheats – Go After the Tax Code – Bloomberg
Illusion of Recovery – Feelings Versus Facts – The Burning Platform
Withholding Consent from the Khan – Mises

Oil drops below $97 as traders eye US supplies – AP
Gold eases towards $1,710/oz, all eyes on Greece – Reuters
State media: Iran is ready to ban oil exports to Europe – CNN
Stock gains turn hedge fund losers into winners – Reuters
China gold imports surge 250% in 2011 – Commodity Online
A Closer Look at Bubbles: Natural Gas & Gold – Profitimes
The two sides of the Gold coin – Peter Brandt
Grumpy Old Permabear – Financial Armageddon
It’s 1980 Again – Mises

Last word: BLS Decennial Census Adjustment – TBP
Participation rate shows a troubling trend – Sober Look
Fiscal policy: What does ‘Keynesian’ mean? – voxeu
The Downward Mobility of the American Middle Class – Robert Reich
China to Aid Home Buyers to Balance Crackdown on Speculators – Bloomberg
China growth estimate for 2012 cut to 8.25% – China Daily
Greece to Eliminate 15,000 Government Jobs – NY Times
If Greece Doesn’t Reform, ‘It Can’t Expect Solidarity’ – Spiegel
How did Australia avoid the 2009 recession? – The Money Illusion
Japan Adopts Stealth Intervention to Slow Yen Gains – Bloomberg
Mortgage servicers to begin using new HAMP standards in May – Housing Wire
The Federal Reserve’s Explicit Goal: Devalue The Dollar 33% – Forbes
Fed should raise rates in 2013, Bullard says – Reuters

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