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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.
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.
The 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.
The Commerce Department reported that, after expanding at an annual rate of 0.4 percent in the fourth quarter of 2012, real gross domestic product in the U.S. increased at a rate of 2.5 percent during the first quarter of 2013.
This is the first of three estimates for the period and the details are not very encouraging. Like most other economic reports over the last month or so, today’s result came in well below the consensus estimate, in this case an expectation of a 3.1 percent growth rate.
Consumer spending continues to drive the U.S. economy, accounting for 2.24 percentage points of the overall 2.5 percent gain, and household expenditures on such items as housing, utilities, and healthcare dominated this category.
Declining government spending subtracted 0.80 percentage points from growth and net exports subtracted 0.50 percentage points, this combination offset by a positive contribution of 1.56 percentage points from gross private domestic investment, two-thirds of which was accounted for by a surge in inventory rather than actual investment.
Following a dramatic decline in the fourth quarter, nearly all of the government spending cutbacks during the first quarter came from defense in what was the steepest back-to-back drop in military outlays since the 1950s.
MUST READS
Debt, Growth and the Austerity Debate – NY Times
Why everyone is wrong about austerity – MarketWatch
Beware the GDP report’s soft underbelly – Washington Post
Everything Is Rigged: The Biggest Price-Fixing Scandal Ever – Rolling Stone
Provopoulos Says ECB May Never Need to Use Bond-Buying Program – Bloomberg
Cypriot Bailout Didn’t Cause Euro-Area Deposit Flight, Data Show – Bloomberg
BOJ in credibility test as divisions emerge over inflation target – Reuters
Japans’s Scary Lesson on Slashing Interest Rates – Bloomberg
Bank of Japan stands firm while deflation worsens – CNN/Money
Bank of Japan Sees Inflation Nearing Target in 2015 – Bloomberg
Fear of falling out of middle class stalks Americans – Globe & Mail
Risk of Bond Market Revolt in Japan: Expert – CNBC
The 1 Percent’s Solution – Krugman, NY Times
MARKETS/INVESTING
Oil falls below $93 ahead of US growth data – AP
Gold pauses after rally, set for strong week – Reuters
Call This Market Surge the Anti-Austerity Rally – CNBC
The Short Supply of Assets – Pragmatic Capitalism
Nonretired U.S. Investors Grow Optimistic, Retirees Don’t – Gallup
Gold Extends Gains in New York on Signs of More Metal Purchases – Bloomberg
The current gold run is not a repeat of the 1970s – WGC – Mineweb
Catherine Austin Fitts: Another Gold Smackdown Coming? – Dollar Collapse
Big banks cut gold forecasts, but stampede slows – MarketWatch
Mints, Refineries, Out Of Stock – COMEX Inventories Plummet – GoldCore
The Hunger for (Cheaper) Gold Continues Unabated – Sharps Pixley
ECONOMY/WORLD/HOUSING/BANKING
Not So Fast on the Deflation Talk – E-piphany
The Noose On The Economy Is Tightening – Comstock Funds
It’s Too Early To Declare A Winner In The Economic Debate – streettalklive
A slowmotion sequester hits America’s poor with stealth cuts – Guardian
Southern Europe’s Recession Threatens to Spread North – NY Times
What a floating currency gives and what it does not – Financial Times
Italy’s Letta moves forward to shape government – Reuters
China Leaders Warn on Financial Risks, Rebound Falters – Bloomberg
The Government’s Latest Mortgage Fix Is Failing – CNBC
Zillow: “Unsustainable” Home Price Appreciation Cooling – MND
Christopher Whalen: Fed Is Wasting Its QE Ammo – Money News
Yellen’s Focus on Unemployment Adopted by Fed – Bloomberg
Hawks and Doves at the Fed – NY Times
It seemed like a good idea to update the chart below since so many people seem to think that late-summer of 2011 was the best we’ll see for the gold price for a few decades.
The market shellacking of April 12th and 15th is clear to see to the right, but, if late-summer of 2011 marked the highest gold price we’ll see for another generation, this gold bull market surely ended with a whimper, rather than the more common bang.
More evidence that the recent sell-off in precious metals markets was due to speculative traders pushing prices around rather than an end to the long-term bull market comes with word that option premiums for gold and silver ETFs are now soaring as prices rebound.
After the steepest plunge for precious metals in over 30 years, gold and silver prices are now rising sharply, a move that was anticipated by option traders not long after the lows of ten days ago.
While some of the recent surge is no doubt due to short-covering, there are clearly a lot of investors in the world who thought that last week’s sell-off was way overdone.
Lower prices have resulted in physical demand for gold and silver bars and coins skyrocketing around the world as retail investors clearly don’t share the dire views of some investment banks that proclaimed the “gold bubble has popped” and that the “secular bull market is dead.”
[To continue reading this article, please visit Seeking Alpha]
By Tim Iacono, Since 2005
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