by Zero Hedge - March 6th, 2011 11:25 pm
Courtesy of Tyler Durden
Submitted by MacroStory.com
Banks Face Renewed Headwinds
In the fall of 2010, there was no shortage of news regarding faulty foreclosure processes, aka “robo-signing.” Bank stocks took a hit and the threat of a nationwide foreclosure moratorium appeared imminent. Then came the concept of put back risk to the big banks claiming violations of reps and warranty agreements or pooling and servicing agreements (PSAs). Since that time the media has gone rather quiet on the subject and the price action in the bank stocks would imply all is well. BAC settled for pennies on the dollar with one of the GSEs and the stock rocketed that very day as investors were no longer “worried about the uncertainty.”
The story may have gone cold but the lawsuits, court rulings, class actions, investigations have only heated up and continue to grow. In fact they have grown to the point where keeping up with all of it was next to impossible. Banks have tried to downplay any of these threats in their most recent earnings releases and conference calls but suddenly things seem to have changed. Recent SEC filings by JPM, earnings restatements by BAC, a quick departure of Howard Atkins from WFC and regulators investigating CDO transactions by C have begun to turn the spotlight back to the banks and the balance sheet risk they face.
MERS was recently sued by a small county in Massachusetts for $22 million for failure to pay recording fees. This is just one small county in one state. The warning shot has been fired. States face hundreds of billions in budget gaps. States have been defrauded of legal recording fees by MERS who will argue their electronic system of registration was a more efficient process in a fast moving mortgage market. MERS was created by the real estate finance industry (per their website) and should these floodgates open, the banks who used MERS to transfer mortgages may ultimately be liable.
“Citigroup, the third-largest U.S. bank by assets, also said U.S. regulators are examining how it structured and sold collateralized debt obligations as part of an investigation into mortgage-related businesses.” – Bloomberg
The Obama administration as part of the ongoing 50 attorneys general investigation of robo signing is proposing a $20 billion settlement whereas proceeds will be used for principal reductions for those underwater in their mortgages. The…
by Optrader - March 6th, 2011 11:25 pm
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by Zero Hedge - March 6th, 2011 10:54 pm
Courtesy of Tyler Durden
One of our key predictions from early this year has been that Goldman Sachs’ formerly crack economic team (and now considered by some to be nothing but a propaganda team on crack) will in the coming weeks and months materially downward revise its dramatic economic upgrade from early December (just coincidentally coinciding with the minute the Fed released previously secret bank bailout records), which ended the firm’s skeptical stance on the US economy, and launched it into all out Kool-Aid mode on nothing but one-time adjustments courtesy of a last gasp attempt at fiscal stimulus. While we are still scratching our heads why Hatzius would totally discredit himself by doing nothing more than what momentum traders do at an inflection point, and calling for a paradigm shift in his outlook when the most recent bout of gains is not driven by any recurring fundamental improvements, frankly we don’t care. What we do know is when Goldman turns outright bearish again, some time in late March, early April, it will be time to buy QE3 with both hands, following a dinner or two between Hatzius and Bill Dudley at the Pound and Pence. Tonight, Hatzius issued his first and very vague intro to the coming mea culpa: “The increase in oil prices is emerging as a more meaningful downside risk to growth later in the year. At this point, we emphasize that this is just a risk, not a change in the forecast, as our commodity strategists expect part of the near-term price increase to reverse if the situation in the Middle East stabilizes. But we are now clearly moving into riskier territory” and “eventually, fiscal policy will need to tighten anyway because the current structural deficit is much too large to be sustained over the longer term. But if this tightening occurs more quickly than expected, that would likely weigh on near-term growth and, in turn, reduce the likelihood of tighter monetary policy.” We are certain that today’s note is the first whisper to those who read between the lines on what is coming from Goldman as soon as a few weeks from today, perfectly in line with Zero Hedge expectations. To be certain, it wouldn’t be a Goldman report without the now traditional comic interlude: “Going forward, we expect employment to continue growing at a healthy clip, but participation is likely…
Egypt Paper Plunges On Latest Stock Market Reopening Delay, 266 Day Bond Hits 12.47% Following Partial Auction Failure
by Zero Hedge - March 6th, 2011 10:24 pm
Courtesy of Tyler Durden
Remember when Egypt said that March 6 is the latest, guaranteed stock market reopen, or else? Well, the day has come and gone, and no Egypt stock market (all those who have been buying the EGPT ETF are forgiven for feeling like total idiots right about now). What however is trading are Egyptian bonds, which have plunged as a result of the ongoing total and complete chaos in the revolutionary country, which is now seeing a second wave of reactionary violence as fighting escalates between the police and protesters in Alexandria. As BusinessWeek reports: “Egypt’s borrowing costs are rising to the highest in more than two years and stocks listed overseas are tumbling as the Cairo exchange’s five-week shutdown and new rules on shareholder disclosure keep investors away. The Ministry of Finance sold 3 billion pounds ($509 million) of bonds yesterday, 1.5 billion pounds less than planned, as yields on 266-day notes climbed 31 basis points from the last auction to 12.47 percent, data compiled by Bloomberg show. Global depositary receipts of Commercial International Bank Egypt SAE sank 15 percent in London last week to the lowest level since July. Orascom Telecom Holding SAE traded 5.2 percent below its Jan. 27 close, when the Egyptian Exchange shut down.” Our advice: don’t expect Egypt to reopen any time soon, and certainly not before the situation in Libya is under control, which won’t be for a long time. In the meantime the flight to safety trade (read gold, silver and crude) is raging overnight. And if and when it reopens, look for nothing less than freefall: “The EGX30 may drop another 10 percent when it eventually reopens, said Slim Feriani, London-based chief executive officer of Advance Emerging Capital Ltd., which manages $750 million in frontier and developing nation stocks including Egyptian shares.”
Egypt’s bourse delayed indefinitely the reopening planned for yesterday citing the resignation of Prime Minister Ahmed Shafik in a March 3 statement. Regulators said last week they may require investment funds to disclose their shareholders as part of a probe of officials linked to ousted president Hosni Mubarak. The new rules and the bourse’s closure are deterring foreign funds and may spur selling when trade resumes, according to F&C Asset Management Plc and ING Investment Management.
“The fact that Egypt’s market
by ilene - March 6th, 2011 9:26 pm
Courtesy of Michael Snyder at Economic Collapse
When Barack Obama, the Federal Reserve and the mainstream media tell us that we are in the middle of an economic recovery, is that supposed to be some kind of sick joke? According to newly released numbers, over 44 million Americans are now on food stamps. That is a new all-time record and that number is 13.1% higher than it was just one year ago.
So how many Americans have to go on food stamps before we can all finally agree that the U.S. economy is dying? 50 million? 60 million? All of us? The food stamp program is the modern equivalent of the old bread lines. More than one out of every seven Americans now depends on the federal government for food. Oh, but haven’t you heard? The economy is showing dramatic improvement. Corporate profits are up. The stock market is soaring. Happy days are here again.
It just seems inconceivable that anyone can claim that the economy is improving when the number of Americans on food stamps continues to set a brand new record every single month. But the food stamp program is not the only indicator that the economy is still having massive problems. The following are 10 more reasons why the U.S. economy is simply not getting any better….
#1 Some recent statistics actually indicate that the number of unemployed Americans is still going up. According to Gallup, unemployment in the United States rose to 10.3% at the end of February. That is the highest number Gallup has reported since early last year.
#2 The housing industry is still a complete and total disaster. In fact, new home sales in the U.S. in January were 11.2% lower than they were in December. Not only that, the number of new home sales in January was18.6% lower than the number of new home sales in January 2010. That is not a sign of improvement.
#3 There wouldn’t even be much of a housing industry at all at this point if it was not for the U.S. government. Right now the U.S. government is either writing or guaranteeing well over 90 percent of all mortgages in the United States. So what would the housing market look like in 2011 if the government was not
by ilene - March 6th, 2011 9:21 pm
Courtesy of MIKE WHITNEY
Originally published at CounterPunch
Subprime is back!
Only this time it’s popped up in the auto market where it’s triggered an impressive surge in sales. According to Marketwatch, General Motors February sales topped 45% to a robust 207,028 vehicles, way above analysts expectations. But soaring car sales have less to do with the allure of those gussied-up Silvarados than they do with "easy financing" for people with less-than-stellar credit. Here’s a clip from an interview on Wednesday’s Nightly Business Report with Autonation’s President Michael Maroone that helps to explain what’s going on.
NBR’s Susie Gharib: Another dose of good news today from the auto world, a day after Detroit`s big three reported strong February sales. Autonation, the country`s largest seller of new and used cars, reported a big jump in its numbers. New vehicle sales rose 29 percent compared to a year ago. And U.S. brands made up 40 percent of sales. GM models were especially popular….. Mike, what about any kind of special deals or incentives to entice consumers to buy?
Maroone: Well, almost every day there`s a new incentive. They`re used in a very tactical manner. The incentives are relatively flat with prior periods. But today we saw GM announce zero percent financing, up to 72 months on specific models. We`re seeing Honda increase their incentives. Nissan`s got a very aggressive program. Toyota has been aggressive. So almost every manufacturer has something and it varies tremendously. It`s certainly tactically driven and it is stimulating business.
Gharib: What about on the credit side, for someone that does need financing, is it getting easier to get a loan or is it still pretty tough?
Maroone: Susie, it`s gotten much easier. The big driver of the recovery in 2010 was the restoration of credit. The change in 2011 is we`re now seeing an improving environment for sub-prime. So last year prime and near prime were more normal and this year we`re starting to see the sub- prime segment come along and that`s very important for our industry. (The Nightly Business Report)
Repeat: "72 months zero percent financing" to people with dodgy credit. Sound familiar?
But why would the big car dealers want to get caught up in another enormous subprime meltdown? How do they benefit from issuing loans to people who may not be able to repay the debt?
by ilene - March 6th, 2011 9:05 pm
From the start of the bull market back in March 2009 until just recently, oil and the stock market had a seemingly wonderful relationship. Most of the time, when stocks moved higher, oil moved higher as well. On the rare occasion that equities headed lower, oil tagged along to the downside. This wonderful relationship has recently become strained, however, and the two have seemingly chosen to go their separate ways.
Below is a chart highlighting the rolling 1-month correlation between the S&P 500 and oil (using daily % changes) since the start of the equity bull market on March 9th, 2009. The higher the number on the positive side, the more closely the two are moving together. The lower the number on the negative, the more the two are moving in the opposite direction. As shown, the correlation between the stock market and oil remained positive up until just recently, but the breakup between the two has been swift and extreme. At the moment, the one-month correlation between the two stands at -0.70.
Bill Buckler On How The US Morphed From A “Global Beacon Of Freedom” To A Symbol Of Political And Economic Repression
by Zero Hedge - March 6th, 2011 8:22 pm
Courtesy of Tyler Durden
In his latest edition of the Privateer newsletter, Bill Buckler confirms that he is one of the premier politco-economic commentators, with one of the most devastating expositions on how America, once the land of the brave and the home of the free, and truly a beacon of freedom for the rest of the world, has entered the death spiral of its cilivizational curve, which “beginning of the end” started in 1913 with the introduction of the income tax and the ascent of the Federal Reserve, and now, a century later, has morphed into what can poetically be called the “ending of the end.” Recent events in the Middle East and Africa only underscore how rapidly the sun is setting on the world’s once undisputed superpower. That China is merely biding its time before it disconnects its mutual life support system to the US (which contrary to conventional wisdom, is far more important to the US than vice versa, now that the Fed is by the far the biggest owner of US debt), and ends its symbiosis with US fiscal and monetary policy, should not be a reason for optimism to anyone. With each passing day, Chinese superiority is becoming ever more palpable (even despite the massive loan bubble currently in process in China), even as desperate US attempts to cling to the last trace of its former superpower status are getting increasingly ignored by virtually everyone. If Buckler is correct, the final nail in the US superpower status coffin could come as soon as the unwind of events in MENA, where the people have made it all too clear the US is no longer welcome. What happens next will indicate just how rapidly the complete fall from grace for the US will transpire: “The Middle East is again in strife. This time, the conflict is between the regimes which have been installed and supported by the US government in their march to empire and the people who those same regimes have ruled with an iron fist. To these people, the US is not looked upon as an “exemplar” of anything – except political AND economic repression.“
There is much more in this week’s full Privateer newsletter, but the following segment should be read by all
“They Hate Us For Our Freedom”:
There are two supremely
by Chart School - March 6th, 2011 8:21 pm
Courtesy of Chris Kimble
In the chart below, Silver stocks (ETF) looks to have broken from its sideways channel. Both had a nice relative strength day this past Friday! See performance results in the chart below.
CLICK ON CHART TO ENLARGE
Gold may be getting the headlines of late, yet when it comes to commodity/portfolio performance, Silver/Silver stocks is the clear winner over the past 30 days.
CLICK ON CHART TO ENLARGE
Game Plan…remain overweight Silver Futures/Silver ETF (SLV) and owners of Silver Stock ETF (SIL). Will remain using the breakout as the stop loss.
by Zero Hedge - March 6th, 2011 6:44 pm
Courtesy of asiablues
By Dian L. Chu
There was a debate recently between Rick Santelli of CNBC and James Bullard, President of the Federal Reserve Bank of St. Louis regarding the inflation effects of the QE2 initiative.
Bullard, the economist, cited the core inflation rate, and even the headline inflation rate as illustrative of a lack of serious inflation pressures in the US economy. Santelli, on the other hand, talked the trader`s perspective of inflation wanting to use the CRB Index (Fig. 1) as a true indication of inflation effects since QE2 was brought up at Bernanke’s Jackson Hole Speech in August 2010.
So let us compare two scenarios and ask ourselves would the US economy be doing better without the QE2 initiative?
- 2.50-2.70% 10-Year Treasury Yield
- $2.64 US Gasoline Price (August 2010)
- Cotton Prices at $85 (Contract Size 50,000 pounds)
- S&P 500 Index 1100
- Copper Prices $3.25 a pound
- US Dollar Index at 83.00
- Lumber Prices at $200 (Futures Contract –Contract Size 110,000 board feet)
- Sugar Prices at $17.50 (Futures Contract-Contract Size 112,000 Sugar #11)
- Cattle Prices at $92 (Futures Contract-Contract Size 40,000 pounds)
- Milk Prices at $14 (Futures Contract-Contract Size 200,000 pounds Class III)
QE2 Effects So Far:
- 3.50% 10-Year Treasury Yield
- $3.50 US Gasoline Price
- Cotton Prices at $215 (Futures Contract -50,000 pounds)
- S&P 500 Index 1320
- Copper Prices $4.50 a pound
- US Dollar Index at 76.40
- Lumber Prices at $303 (Futures Contract)
- Sugar Prices at $30 (Futures Contract)
- Cattle Prices at $114 (Futures Contract)
- Milk Prices at $19.50 (Futures Contract)
About That Unemployment Rate…
This just gives a snapshot of some of the inflationary effects for the US consumer. I cannot think of any argument where higher interest rates resulted from QE2 are good for the housing sector, which is the most troubled part the US economy.
Nevertheless, I must add that the unemployment rate is better, and we have created more jobs since QE2 but with a highly fluctuating job pool where workers give up looking and leave the labor market it is hard to gauge the real unemployment numbers.