Comments on: Case Shiller Improves Monthly, Falls Yearly

By: leftback

leftback — Tue, 25 Aug 2009 22:10:45 +0000

“Let the large dinosaurs die, and a thousand small mammals feast on their carcasses…”

Words to live by, Dr. Kenneth…. what a splendid image to hold in mind.

Onlooker, it’s a momo world out there for retail inwestors, and they are about to be left holding the bag o’ banks.

By: Dr. Kenneth Noisewater

Dr. Kenneth Noisewater — Tue, 25 Aug 2009 20:40:43 +0000

How much overcapacity is still out there, unsold, underwater and rotting away (or having commodity metals stripped out by opportunistic vandals)?

How much underwater paper still sits in bank vaults, marked to fantasy, and un-foreclosed in order to maintain the kabuki solvency dance?

Could it be a “short squeeze” on available housing ginned up by cheap credit (for those who can still have it) and government funny money stimulus ($8k)? I bet prices would not be rising if the banks were forced to mark their trash to market, as they should have had to this whole time..

Let the large dinosaurs die, and a thousand small mammals feast on their carcasses…

By: Onlooker from Troy

Onlooker from Troy — Tue, 25 Aug 2009 19:16:09 +0000

This from a comment on that Macro Man post:
“He has taken on a big FAZ position, and he was looking at a graph of it on his laptop during his flight out here. The stewardess was coming up on the aisle, glanced at his screen, and said to him, “No, no. That’s not the one you want. You want FAS!”"

Classic. The flight attendant giving stock/ETF tips (assuming it’s a factual anecdote; which I don’t doubt right now). Nothing could go wrong from here, eh?

By: DeDude

DeDude — Tue, 25 Aug 2009 18:30:20 +0000

“The level of leverage we saw is simply not coming back”

Only the future will tell. I always said that greed is a constantly roaring engine, whereas fear is a short-lived “kaboom”. We shall see how long the “kaboom” of “jez house prices can fall” will last ;-)

By: Cohen

Cohen — Tue, 25 Aug 2009 18:17:58 +0000

Re: treasury yields vs. equity markets

I notioced this a couple of weeks ago but now the divergence is becoming more drastic with the 10-year yield down again today.

By: Cohen

Cohen — Tue, 25 Aug 2009 18:14:50 +0000

@DeDude

Greed was a prime motivator for sure but if you read about the models that decisions were based on, especially the ones at AIG-FP, to say they were unrealistic would be generous. They didn’t expect bailouts bc the idea of the losses creating such a scenario were not even a possibility. Now reality has slapped them (and continues to) in the face. The level of leverage we saw is simply not coming back.

By: DeDude

DeDude — Tue, 25 Aug 2009 18:03:37 +0000

Cohen; I agree they would not get bailed out of a second hangover from drinking the same punch. However, I also doubt that they care, as long as they think they can bail out of the company with a couple of years worth of zillion dollar bonuses. I don’t think that they predicted they would be bailed out last time – yet they did it anyway because the money was so good. There were pleanty of warning last time, but greed trumphed fear. That always happens, and will again next time.

Pat G; it’s fine to use y-o-y, if you want to be at least half a year late in catching the change in trendline ;-)

By: The Curmudgeon

The Curmudgeon — Tue, 25 Aug 2009 17:39:59 +0000

The only difference with now and 2006/07 is that the government has expressly agreed (not just with a Greenspan/Bernanke put) to underwrite all of the stupid risk-taking of the commercial and investment banks, unless they happen to be not so big enough that everyone knows their name. It’s “Cheers” for the sacred nineteen, and of course, the gse’s; “Lillith” for the rest.

Yet the sheep they shear with their loans still must have some means of growing wool. Except for the politically-favored automobile industry worker, that requirement is problematic, even if you give away part of the wool in the form of a tax credit. No matter how “good” (I wonder when an increase in prices become categorically “good”?) this report looks, the simple reality is that explicit government bubble-blowing is not apt to end any better than the bubbles it blew by implication before.

By: leftback

leftback — Tue, 25 Aug 2009 17:35:32 +0000

“The markets are following the script perfectly and the directors at the FED, USG, and GS are grinning ear to ear, marvelling at their wonderful production.”

Agreed, Tiny Tim and Banana Ben know how to put on a Broadway show. The chorus line has been remarkable.

By: Peter Boockvar

Peter Boockvar — Tue, 25 Aug 2009 17:11:39 +0000

To highlight the seasonality of housing and its impact on pricing where the spring selling season is the busiest of the year, the S&P/Case Shiller HP Index, which does not seasonally adjust its m/o/m pricing, has shown its best performance in Q2 in every year except one going back to 2001. 2009 is of course not complete but Q2 saw a gain of 1.3% after a drop of 7% in Q1. On the downside in ’07 and ’08, Q2 saw the smallest decline and in the boom years in ’04, ’05 and ’06, Q2 saw the biggest rise. In ’03, Q3 price gains barely exceeded the Q2 rise while in ’01 and ’02, Q2 had the best price increases. The price data seen is welcome relief but it’s that time of the year and the $8000 tax credit and slowing foreclosure rate had its impact. Add to this the still punk Present Situations component in Confidence and it helps to explain again, the lack of belief in the sustainability of recovery that the bond market has relative to stocks.