The system for financing mortgages and regulating that financing has failed, completely and utterly. The mortgage and real estate markets are now in collapse.
Yesterday I wrote about how positive feedback loops lead to collapse. Welcome to the U.S. housing and mortgage markets. As I have documented here numerous times, the entire U.S. mortgage market has already been socialized: 99% of all mortgages are backed by the three FFFs--Fannie, Freddie and FHA--and the Federal Reserve has purchased a staggering $1.2 trillion in mortgage-backed assets in the past year or so to maintain the illusion that there is a market for mortgage-backed securities.
There is, but only because the mortgages are backed by the Federal Government and propped up by the Federal Reserve.
The mortgage market is completely dependent on government guarantees and quasi-Government purchases of securitized mortgages. If the mortgage market were truly socialized, then the Central State would own the banks which originate, service and own the mortgages.
But then the private owners and managers of the "too big to fail" banks would not be reaping hundreds of billions in profits and bonuses. And since the banking industry has effectively captured the processes of governance (that is, Congress and the various regulatory agencies), then what we have is a system of private ownership of the revenue and profits generated by the mortgage industry and public absorption of the risks and losses.
Could anything be sweeter for the big banks? No.
The incestuous nature of the system is breathtaking. The Fed creates the credit which enables the mortgages, the Treasury guarantees the mortgages via Fannie, Freddie and FHA, the Fed buys the mortgages ($1.3 trillion in mortgages are on their balance sheet) and the private banks collect the fees and profits.
One of the core tenets of the Survival+ critique is the State/Financial Plutocracy partnership. There are many examples of this partnership (crony capitalism in which the State is the "enforcer" which collects the national income and distributes it to its private-sector cronies), but perhaps none so blatant and pure as the mortgage/banking sector.
But now the entire legal basis for that privatized-profits, socialized losses system has dissolved. The foreclosure scandal…
The September Non-Farm Payrolls report was not good news.
This is a remarkably unnatural US economic recovery, with gold, silver, and other key commodities soaring in price, the near end of the Treasury curve hitting record low interest rates, and stocks steadily rallying as employment slumps and the median wage continues to decline.
The US is a Potemkin Village economy with the appearance of prosperity hiding the rot of fraud, oligarchy, and political corruption.
As monetary power and wealth is increasingly concentrated in fewer hands, the robust organic nature of the economy and the middle class continues to deteriorate.
This is what is happening, and monetary policy cannot affect it. The change must come from the source, which is in political and financial reform. And the powerful status quo is dead set against it.
The long term trend of employment has not yet turned lower which would make the second dip ‘official’ from our point of view. But the prognosis does not look good.
Lobbyists from the financial industry have paid hundreds of millions to Congress and the Obama administration. They have bought virtually all of the key congress members and senators on committees overseeing finances and banking.
Here is an advance preview of the monthly moving averages I track after the close of the last business day of the month. At this point, before the open on the last day of the month, three S&P 500 strategies are now signaling "invested" -- unchanged from last month. Two of the five of the Ivy Portfolio ETFs, Vanguard FTSE All-World ex-US ETF (VEU) and PowerShares DB Commodity Index Tracking (DBC), are signal "cash" -- also unchanged from last month.
If a position is less than 2% from a signal, it is highlighted in yellow.
Note: My inclusion of the S&P 500 index updates is intended to illustrate a popular moving moving-average timing strategy. The index signals also give...
With NIRP raging in the Eurozone and over €1.5 trillion in European government bonds trading with negative yields, many were wondering when any of this perverted bond generosity will spill over to other debtors, not just Europe's insolvent governments (who can only print negative interest debt because of the ECB's backstop that it will buy any piece of garbage for sale in the doomed monetary union). In fact just earlier today we, rhetorically, asked a logical - in as much as nothing is logical in the new normal - question:
You've probably seen articles and adverts discussing how much money you'll need to "retire comfortably." The trick of course is the definition of comfortable. The general idea of comfortable (as I understand it) appears to be an income which enables the retiree to enjoy leisurely vacations on cruise ships, own a well-appointed RV for tooling around the countryside, and spend as much time on the golf links as he/she wants.
Needless to say, Social Security isn't going to fund a comfortable retirement, unless the definition is watching TV with an box of kibbles to snack on.
By this definition of retiring comfortably, I should be able to retire at age 91--assuming I can work another 30 years and the creek don't rise.
Since I earned my first real Corporate America paycheck at 1...
(ETFTrends.com by Todd Shriber): "Betting on insider buying is again proving to be an efficacious strategy as the Direxion All Cap Insider Sentiment Shares (NYSEArca: KNOW) has been noticeably less bad than the S&P 500 to start 2015. Add to that, investors are warming to the merits of KNOW's insider sentiment strategy." [Editor's note: KNOW tracks the Sabrient Multi-cap Insider/Analyst Quant-Weighted Index (SBRQAM)]. Read article
Suppose you had the technical ability and raw materials to print up counterfeit dollars, euros or yen that were identical to the real things. Assume you could spend them as fast as you could create them with no fear of any repercussions.
Would you prudently print up only as much fresh currency as you needed for your current lifestyle? Would you create just a bit more than that to help relatives or those in need?
It is most likely you’d have your printing press running 24 hours a day, seven days a week. Becoming the richest person in the world would confer great power upon you.
You could rationalize this action because you plan to use the money for good purposes. Imagine the warm feeling you’d get by giving every person in America one million do...
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So as I was saying yesterday (Bitcoin: The Biggest Clown Show In History?), Bitcoin has several obstacles on the path to potential success as an alternative currency. But I forgot to mention hacking and theft at Bitcoin exchanges and other technical problems. This is related to the lack of government backing and the fact that the value of Bitcoins is based entirely on confidence.
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
PSW Members - well, what a year for biotechs! The Biotech Index (IBB) is up a whopping 40%, beating the S&P hands down! The healthcare sector has had a number of high flying IPOs, and beat the Tech Sector in total nubmer of IPOs in the past 12 months. What could go wrong?
Phil has given his Secret Santa Inflation Hedges for 2015, and since I have been trying to keep my head above water between work, PSW, and baseball with my boys...it is time that something is put together for PSW on biotechs in 2015.
Cancer and fibrosis remain two of the hottest areas for VC backed biotechs to invest their monies. A number of companies have gone IPO which have drugs/technologies that fight cancer, includin...
Stocks got off to a rocky start on the first trading day in December, with the S&P 500 Index slipping just below 2050 on Monday. Based on one large bullish SPX options trade executed on Wednesday, however, such price action is not likely to break the trend of strong gains observed in the benchmark index since mid-October. It looks like one options market participant purchased 25,000 of the 31Dec’14 2105/2115 call spreads at a net premium of $2.70 each. The trade cost $6.75mm to put on, and represents the maximum potential loss on the position should the 2105 calls expire worthless at the end of December. The call spread could reap profits of as much as $7.30 per spread, or $18.25mm, in the event that the SPX ends the year above 2115. The index would need to rally 2.0% over the current level...
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at firstname.lastname@example.org with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
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