A few more interesting Housing related charts: (click or larger/original charts)
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via Mint
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source: Jim Bianco Research
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via Calculated Risk
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Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
Faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof. —John Kenneth Galbraith
Knowing that the vote over the weekend in Greece was really a referendum on Euro membership, a majority of the Greek Parliament said yes to staying. European Finance Ministers meet again on Wednesday to solidify the 2nd bailout package for Greece at the same time hopefully a deal is consummated between Greece and its creditors this week. The Greek 14.5b euro bond that matures on March 20th is up by 2 pts. The optimism that all will be completed and contained AGAIN to Greece has yields lower in Portugal, Spain and Italy. The iTraxx Financial Index is also narrower by...
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May 27th, 2009 at 1:21 pm
and Mortgage yields are tracking the 10-year T-bond yield upward…this is the beginning of the end- game for the bounce/green shoots/effectiveness of pyscho-theraputic pharmaceticals/whatever you thought was apt grow in the shadow of the dense thicket of dead trees known as the US financial and economic system. Once the money printing proves feckless, reality–always crouching at the door–will start seeping in around its edges:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aw90LMfkBOeU&refer=home
By Jody Shenn
May 27 (Bloomberg) — Yields on Fannie Mae and Freddie Mac mortgage bonds rose for a fourth day, after yesterday for the first time exceeding where they stood before the Federal Reserve announced it would expand purchases to drive down loan rates.
Yields on Washington-based Fannie Mae’s current-coupon 30- year fixed-rate mortgage bonds climbed to 4.3 percent as of 10:25 a.m. in New York, the highest since March 10 and up from 3.94 percent on May 20, data compiled by Bloomberg show.
The Fed, seeking to use lower home-loans rates to stem the housing slump and bolster consumers, said March 18 it would increase its planned purchases of so-called agency mortgage bonds by $750 billion, to as much as $1.25 trillion, and start buying government notes. Rising mortgage-bond yields, driven higher in part by climbing Treasury rates, means the Fed now “faces a challenge to its ability to sustain low mortgage rates,” according to Jeffrey Rosenberg at Bank of America Corp.
May 27th, 2009 at 1:26 pm
They will have to support the Treasury market now. Someone is about to yell “FIRE” at the NYSE.
May 27th, 2009 at 1:32 pm
On related note (banking, fraud, etc.) – I thought this post from a new blogger at Tyler Durden’s site was VERY interesting…
http://zerohedge.blogspot.com/2009/05/like-bankunited-sex-crime.html#disqus_thread
May 27th, 2009 at 1:34 pm
What’s up with Naz? Before long we will have the nightly news saying – “How high can it Go” back in the .com boom
May 27th, 2009 at 1:38 pm
@ahab: Late to the game mutual fund and retail broker buying, perhaps?
May 27th, 2009 at 1:38 pm
Barry, Curmudgeon, Karen, Ben 22, Lefty, Manny, Ahab…all the usual suspects:
this is OT but I found it fascinating:
http://www.youtube.com/watch?v=akVL7QY0S8A
The Coming Collapse of the Middle Class
This is not the usual nut job video…very interesting…actually amazing lecture..it is long, so save it for tonght if you are interested….
May 27th, 2009 at 1:40 pm
NAZ buying = InvestTools.
May 27th, 2009 at 1:43 pm
I’m a buyer of QID at these levels. I can be patient.
May 27th, 2009 at 2:24 pm
Mannwich, I too…. yesterday, but got stopped out this am.
Not so patient.
Was going to try it often with tight stops. I am close to giving up. likely will — just in time to miss the fall.
May 27th, 2009 at 2:31 pm
BTW, you are all welcome. After we crossed 913, I unwound my SDS position from yesterday and look what happens. It was like ringing the bell at the top.
May 27th, 2009 at 2:39 pm
cjcpa @ 2:24
One school of thought holds that you should only try to catch 1/3 of the big moves. If you think that the Naz is going to drop 30%, you could wait for it to drop 10% first.
(Of course, the Naz could drop 10% and then rocket higher after that).
May 27th, 2009 at 2:56 pm
DL,
Whoever is managing this market must be having a good laugh. This is exhausting. It seems that every drop is preceeded by exceeding a resisstance level by two or three points, just to bust stops. The times I set loose “mental stops,” it just roars higher or I’m in a meeting. This is tough.
May 27th, 2009 at 3:01 pm
NAR reports: the bottom is in. Buy now before home prices appreciate!!
May 27th, 2009 at 3:05 pm
Pat G.
What a shocker.
May 27th, 2009 at 3:14 pm
@DL
I just can’t refrain from ripping on those a**holes.
May 27th, 2009 at 3:21 pm
Cursive @ 2:56
I’ve gone from being a bear to being a skittish, paranoid bull (very short term) who’s ready to jump back into the bear camp on a moment’s notice.
May 27th, 2009 at 3:22 pm
Curmudgeon, the dead trees represent only one part of the financial system. As an example, I tried to refinance my mortgage through BofA back in January and they put my application into an infinite delay (they even have a “Sorry for the delays due to high volume” message on their rather fancy looking mortgage portal.) By the time April came around, i got irritated and walked over to a local savings bank across the street from where I live in Boston to get a lower rate and finish the process in 4 weeks flat, while talking/emailing with real loan officers, underwriters, and lawyers. I was so impressed with their services that I also moved all of my accounts over. I’m yet to get through BofA’s automated answering system to be able to let them know that I’m not going to be using their services.
My point is that the failure we’re seeing is not of the entire financial system. It is a failure of the post-Glass-Steagall “financial supermarket” concept. If and when we allow these big dead trees to be hacked down, it will be clearer to see that there is a thriving ecosystem of shrubs underneath whose business models are intact.
May 27th, 2009 at 3:38 pm
@DMR…bingo! There are lots of good, solid, well-run banking institutions (usually the smaller ones) whose careful risk management is just struggling to break green and shoot but for the dead trees blocking their sun. BAC is one of the dead trees. They recently became a client when they bought CFC (I do real estate closings for CFC, now BAC). To put it mildly, the transition has not been smooth.
Prediction: BAC will divest itself of CFC before the Obama administration is history. They don’t know how to run it, and will need the pittance in cash it would bring. Same for Merrill. BAC is a commercial bank that’s dawdling in mortgages and investment banking. They’re not a mortgage company, nor an investment bank.
May 27th, 2009 at 3:42 pm
btw…10 year yield is up to 3.71, a nearly 175 basis jump in the span of about two months, a rise that suspiciously coincides with the announcement in March of the latest Fed money-printing orgy.
May 27th, 2009 at 5:25 pm
This is all in the deflationary depression handbook. As bond yields rise, people will mistake it for a turnaround and inflation expectations…it is actually an increase in credit risk even in the so called “risk-free” rate (despite the warm and cuddly assurances of Moody’s today). Our whole financial system is priced on the 10-year being risk-free!! The yield curve is the steepest ever right now I believe…if it goes into warp-speed, the Starship Enterprise may not make it. (I’m sounding like Macke now).
As for the stock rally, I believe it is probably totally done now. Stands to reason, the biggest deflationary crash in history must provide the biggest sucker’s rally in history. Enjoy your 30 forward P/E on the S&P bulls! It will not end well for you.
May 27th, 2009 at 5:42 pm
Man, this market is just confusing the hell out of me. I wiped off a few more of my longs this morning before the market tanked. I’m going to end up all cash pretty soon.
The only thing I have left are the Asian ETFs I picked up in March. I’ll be selling those off pretty soon too.
May 27th, 2009 at 5:55 pm
SB-
always appreciate your commentary
May 27th, 2009 at 6:04 pm
Steve Barry @ 5:25
“As bond yields rise, …it is actually an increase in credit risk even in the so called “risk-free” rate…”
No way there’s going to be a default, even if we were to get to a (total) debt-to-GDP ratio of 8:1. If priced in dollars (LOL), there’s no credit risk at all. That said, there might be a change in the PERCEPTION of credit risk (I am aware of the increased perception of risk in the CDS market on Treasuries), but government debt would have to go significantly higher for the perceived risk of default to have a material effect on the 10-year note yield.
By far, the more important issue is the perception regarding the propensity of the Fed to monetize the debt.
May 27th, 2009 at 6:36 pm
@Steve Barry (5:25)
Just to chime in…
That is about the TRUEST thing that I’ve heard all weekend!
I’ve been kinda OUT of the markets (at least on a trading basis – not necessarily a COMMENTARY one) for the past month)…
I like it when someone calls “a spade” – “a spade”, and that’s what this market is…
I’m NOT “waffling” when I say the following…
I STILL hold that ben22′s 965 – 1k could come true this summer, but I’m not afraid EITHER to say that this market…;WHICH HAS NO REASON FOR BEING WHERE IT IS…could come crashing down at any given moment…
Good luck to you all who have the “stones” to play it for a FRIGGIN 10% higher when you know it has a 50% down written ALL OVER IT over time on the way down…
May 27th, 2009 at 6:49 pm
cvienne @ 6:36
“this market…which has no reason for being where it is…could come crashing down at any given moment…”
I agree with the foregoing. I have two longs and a short. I should be able to get out without a loss, unless the DOW drops 400 points in an hour.
May 27th, 2009 at 7:38 pm
@DL
I appreciate your disclosure and offer you the following:
-I’m SHORT this market…
-ARROGANTLY, I never closed out my long standing “shorts” at 666 (because I’d expected a move to 640-600)…
-I added to my shorts at 850
- I added to my shorts at 900
- I added to my shorts at 930
- I WILL ADD TO THEM AGAIN if I see 1000
If the S&P is back up at 1200 (or some such crap) at some point in the future, I will PERSONALLY walk up to Franklin and WRITE HIM A CHECK in the amount of my losses to the “charity” of his choosing (although it will be hard because BHO seems to want to LIMIT tax deductions on charitable contributions – instead preferring the proceeds go to the US Treasury to help secure his RE-ELECTION campaign)…
-I’m LONG gold (since 2004, $375, bullion stashed in various geographic locations OUTSIDE US borders)…
-I think US will DEFLATE b4 INFLATE (therefore, I expect my GOLD holdings to DECLINE b4 being worth more, long term)…
Anything else I need to say?
Trading is FUN…Commentary is MORE FUN :-)
May 27th, 2009 at 7:59 pm
http://www.bloomberg.com/apps/news?pid=20601009&sid=aeEBnXC73gOc&refer=bond
Schroder Cuts Gilt Holdings in Global Bond Portfolio
I posted this on the end of another ended thread, but it is interesting that some are getting the heck out of Dodge right this minute…should be a very interesting next couple of weeks….
May 27th, 2009 at 9:16 pm
Interesting notion: T-Bill rise is risk premium not inflation expectation. Have to chew on that one.
I mean there seems to be a common thread here the gov will inflate the debt away over time.
But I suppose that if they keep shoveling trillions to the crooks things really could get out of hand quickly.
I would say based on this, that the second half this year and first half of next year should be telling. If continuing debt default and CRE does continue its crash, it might be a challenging point to question whether the hole is indeed bottomless. And by the time they make that recognition it will be too late. Things will be out of their control. Asif.
May 27th, 2009 at 9:32 pm
@DL:
If there were no rise in risk premium, why did Moody’s feel it necessary to embarrass themselves with this statement today…a statement so ridiculous, I can’t parse it without laughing? I am not saying the US will default, but even a small chance of it and the notion of “risk-free” goes away…and any discounted cashflow analysis uses a risk-free rate as a key input.
“The U.S. government’s Aaa credit rating is stable “even with a significant deterioration” in the nation’s debt, Moody’s Investors Service said, signaling confidence in a rebound from the recession.
The U.S. rating is supported by “a diverse and resilient economy, strong government institutions, high per-capita income, and a central position in the global economy,” New York-based Moody’s said in a statement. At the same time, the firm warned that any “reassessment” of long-term growth prospects could put pressure on the rating.”
May 27th, 2009 at 9:35 pm
and what does the GM default do to corporate spreads? When I talk about credit risk rising, I’m referring to the bond market as a whole, not just treasuries.
May 27th, 2009 at 9:59 pm
Steve Barry @ 9:32
Maybe Moody’s will eventually downgrade the debt. And if they do, they will do it long after the high probability of a downgrade has become a foregone conclusion. And all that a downgrade would mean is that investors (and others) believe that the government will devalue the currency rather than pay the debt through higher taxes. The situation with regard to a “rating” of Treasury bonds is very different from the rating of corporate bonds.
(And of course, much of the increase in the interest rate on the 10 yr T-note over the last 5 months has just been about an increased risk appetite, and reversion to a more normal level of long-term interest rates).
May 27th, 2009 at 10:08 pm
@DL:
At this point, the fact that the Fed can’t seem to control the longer end of the curve is more critical than figuring out why…my theoretical mind would have predicted that they could not control it forever, especially during a shock like this.
May 27th, 2009 at 10:08 pm
Steve Barry @ 9:35
“what does the GM default do to corporate spreads?”
The simple answer would be: “not much”.
It’s hard to know exactly how the GM situation will play out, but at the moment it looks like a bankruptcy judge will decide how many pennies on the dollar GM bondholders will get. Whatever happens, it won’t be a surprise to the corporate bond market, since the whole evolution of the process has been so widely broadcast.
At most, the whole situation with GM and Chrysler would affect only those companies that meet all of the following criteria: (a) a high portion of their employees are unionized, (b) the company is large, and systemically important, and (c) the company faces the possibility of bankruptcy.
Off-hand, I don’t know which companies might meet those criteria.
May 27th, 2009 at 10:12 pm
Steve Barry @ 10:08
“…the Fed can’t seem to control the longer end of the curve…”
Absolutely agree.
And I’m surprised at how many of the people who post here regularly believe that the Fed CAN do this. The Fed has never been able to do this.
There is, however, a related issue, which is that of the extent to which the Fed can minimize the SPREAD between mortgage interest rates, and Treasuries of comparable maturities. There, I am at least open to the possibility that they could have some effect on the spread, at least for a period of several months.
May 27th, 2009 at 10:26 pm
@DL:
I forgot…the bond market is much smarter than the stock market, LOL!
There are plenty of widows and orphans who own supposedly high grade corporates in managed accounts that may think twice about buying some more.
May 27th, 2009 at 11:38 pm
@Steve Barry,
The bond market is “larger”, not “smarter” than the stock market. That’s why the Fed dabbles in bills which have shorter maturity instead of in long bonds. All the TARP money would have caused as much splash in bonds as tossing a pebble into the pacific.