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Friday Morning Links

On May 3, 2013, in Uncategorized, by Tim

MUST READS
What to Expect From the Jobs Report – WSJ
More U.S. Workers Still Predicting Job Loss Than Pre-2008 – Gallup
U.S. Spending Cuts Seen as Key in Slowing Growth – NY Times
EU Lowers Forecast as Euro Area Heads For Two-Year Slump – Bloomberg
German bond yields hit record low after ECB rate cut falls short – Telegraph
You Can’t Judge the ’30s Without Understanding the ’20s – Real Clear Markets
Housewives’ gold rush keeps price from falling – People’s Daily
Gold, backwardation and the ‘time cost of money’ – FT Alphaville
Why Are People with Health Insurance Going Bankrupt? – Naked Capitalism
Why The US’ Economic “Shirt” Can’t Stay Clean For Long? – Zero Hedge
JPMorgan Caught in Swirl of Regulatory Woes – Dealbook
Not Enough Inflation – Krugman, NY Times

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MARKETS/INVESTING
Oil up near $95 ahead of US jobs data – AP
Gold hits 2-week high on weak dollar – Reuters
Avoid the slow bond market meltdown – Money
Fund Investors Leaving US for Emerging Markets – CNBC
Reaching for yield in hot credit markets – voxeu
Sell in May? Find something new to say – CNN/Money
Who’s smartest on gold – Chinese housewives or George Soros? – Mineweb
Chinese housewives pick up 300 tonnes of gold in two weeks – Mining .com
Krugerrand sales soar following gold price slump – SouthAfrican.com
Arizona governor vetoes bill making gold, silver legal tender – Reuters
Einhorn is gored by gold – NY Post

ECONOMY/WORLD/HOUSING/BANKING
Gallup’s Job Participation Rate Surges in April – Gallup
Rogue Economists Champion Prosperity without Growth – Spiegel
Excessive Household Debt, Low Savings Still The Problem – Comstock Funds
Europe’s spring economic forecasts: The economic winter continues – Economist
Italy should use its gold reserves to force a change in EMU policy – Telegraph
Australia’s turn to enter the currency war? – Sober Look
India cuts interest rates for third time this year – BBC
Canadian housing – bursting bubble or gentle landing? – Reuters
Can Cash-Rich Investors Keep Snapping Up Homes? – Fiscal Times
A good housing market might lead to a new great recession – Washington Times
Richard Koo On the Ineffectiveness of Monetary Expansion – SNBCHF.com
Why Not Target a 3% Unemployment Rate? – Bloomberg

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Cheap Money and the Housing Rebound

On May 2, 2013, in Housing, by Tim

Apparently, a strong housing market doesn’t really depend on people having good jobs in order to come up with a down payment and service a mortgage. Whether that strong housing market is healthy or not is another matter as detailed in this special report at Reuters.

The once-beleaguered Las Vegas housing market has been on fire since investment firms led by Blackstone Group LP, Colony Capital and American Homes 4 Rent began buying homes here some eight months ago, backed by $8 billion in investor cash to spend nationally.

These big investors and a handful of others have bought at least 55,000 single-family homes across the U.S. in the past year. In the Vegas area alone, they have accounted for at least 10 percent of the homes sold since January 2012, according to a Reuters analysis of housing transactions.

That added firepower helps explain why home prices in this metropolitan area of 2 million people are up 30 percent over a year ago, far more than the national average of 10 percent.

There’s lots more in this story, most of it disturbing such as 60 percent of Las Vegas home sales being all cash and a reminder that hot money from Wall Street doesn’t tend to stick around once the artificial appreciation stops – when that will be is anyone’s guess.

I missed the S&P Case-Shiller housing report earlier in the week where is looks like Las Vegas is about to overtake Phoenix as the nation’s hottest housing market.

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What Now?

On May 2, 2013, in Commodities, Personal, by Tim

Got in very late last night after a very long day and am just starting to perk up a bit after a nap and another big cup of coffee. Couldn’t help but reflect on what’s happened over the last month or so, particularly when it comes to precious metals as shown below.

During my visit, I had the pleasure of spending some time with a couple of high school buddies who both happen to be financial advisers. It was interesting to hear their take on those two big red bars above as I now have a little better understanding of the view of most U.S. investment professionals. I don’t share that view, but I understand it better.

It should be interesting to see whether all that selling of the GLD ETF over the last month or so proves to be a good or bad decision. My guess is the latter.

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Thursday Morning Links

On May 2, 2013, in Uncategorized, by Tim

MUST READS
ECB cuts interest rates to new low – BBC
ECB cuts rates amid ’shocking indictment’ of economic policy – Globe & Mail
Fed Open to Expanding QE as It Counters Talk of Tapering – Bloomberg
The Federal Reserve speaks: Fearful symmetry – Economist
Why the Fed Worries Inflation Is too Low – Businessweek
Stockman: The Fed Is a ‘Central Bank Gone Crazy’ – Fiscal Times
Quantitative Easing Is Like a Medieval Doctor Bleeding a Patient – Washington’s Blog
Goldman Confirms Global Slowdown Is Deepening – Zero Hedge
Struggling factories underline fragility of world growth – Reuters
Cheap money bankrolls Wall Street’s bet on housing – Reuters
Krugman’s Proud War on Fools, Knaves and Lunatics – Bloomberg
Reinhart-Rogoff Uproar Settles Nothing – Bloomberg
There Will Be Haircuts – Gross, Pimco

MARKETS/INVESTING
Oil price stabilizes near $91 after big drop – AP
Gold edges up after ECB cuts rates to record low – Reuters
Should Investors Fear the Fearless Market? – CNBC
It Looks Eerily Like 2005 in Global Bond Markets – Moneybeat
Margin Debt Hitting Levels Only Seen Once Before – Advisor Perspectives
Sorry, Doomers: The Stock Market Isn’t Divorced From Reality – BI
Gold ETF posts record outflow in April, US coin sales spike – Mineweb
Gold Bull Run Seen Over as Bear Drop Frays Faithful – Bloomberg
HK gold retailers overwhelmed by mainland shoppers – China Daily
China Gold Mania – Coins, Bars and Jewelry Sales Surge 108% – GoldCore
Cash-for-gold at negative rates – FT Alphaville

ECONOMY/WORLD/HOUSING/BANKING
The core CPI-PCE inflation gap – FT Alphaville
China Data Confirm Slowdown in Factories – NY Times
China Cyberspies Outwit U.S. Stealing Secrets – Bloomberg
BOJ: Monetary base soars to record on new QE – Reuters
What’s worrying the Bank of Japan? – CNN/Money
A Deep Frost in Franco-German Relations – Spiegel
Iceland’s economic thaw a thorn in EU’s side – RT News
Debt-crippled Holland falls victim to EMU blunders – Telegraph
Do you know how much house you can afford? – Yahoo!
Fed keeps tapping into MBS well – Housing Wire
Fed Keeps Rates Low, Continues Buying Bonds – CNBC
FOMC Leaves Policy Unchanged – Fed Watch
The Case for Megabanks Fails – NY Times

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Back in a Few

On April 29, 2013, in Personal, by Tim

There will be little or nothing new here in the days ahead due to a trip to the East Coast to visit family and friends.

Some minor surgery next week and more travel later in May will make for light or no posting for a good portion of next month.

Things should get back to normal before Memorial Day, but, then it will be just about summer time, a season when it is very difficult to sit in front of a computer in Montana.

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The Expected Alarming Failure Rate of HAMP

On April 26, 2013, in Housing, by Tim

I’ve written about the government’s loan modification program known as HAMP (Home Affordable Modification Program) on many occasions over the years, primarily to note what was obvious to me – the unusually high debt levels this program allowed sets up borrowers for failure since the debt can’t be serviced over long periods of time.

• Mar 2010 – The New Road to Serfdom – Part 63
• Apr 2010 – The Government’s Loan Mod Bizarro World
• May 2010 – HAMP Back-End DTIs Are Getting Ridiculous
• Jul 2010 – Another Way to Look at HAMP
• Feb 2011 – Loan Modification Data in Need of a Pie Chart

Now, a few years on , the evidence is in and, as expected, default rates on these loan mods have skyrocketed as detailed in this story at CNBC

The U.S. Treasury’s mortgage bailout is failing at an “alarming rate,” according to a government watchdog, but architects of the four-year-old plan say that it is no worse than they expected.

Mortgage Loan ModificationThe Home Affordable Modification Program (HAMP) was launched in early 2009 with the goal of helping 3 to 4 million borrowers avoid foreclosure. So far fewer than one million borrowers are in permanent modifications, and default rates on these modifications are high.

A new report from Special Inspector General for the Troubled Asset Relief Program points to disturbing numbers, but offers no reason for the high rates.

Treasury’s data shows that the longer a homeowner remains in HAMP, the more likely he or she is to redefault out of the program. As of March 31, 2013, the oldest HAMP permanent modifications, from the third and fourth quarter of 2009, are redefaulting at a rate of 46.1 percent and 39.1 percent.

Is that a good thing? Someone at Treasury expected a failure rate of almost half.

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