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Fascinating discussion from Bloomberg Briefings:

The ECB appears to be understating the similarities between the weak growth outlook in Japan after its domestic asset bubbles popped in the early 1990s and that for the euro area in the present crisis. The performance of the Japanese economy 20 years ago was better than that of the euro area more recently. The Nikkei 225 peaked at the start of 1990. GDP was 7 percent higher 4.5 years later, according to the IMF’s measure in constant prices.

The Euro Stoxx 50 peaked in the second quarter of 2007. Economic output was about 1 percent lower 4.5 years later and about 2 percent below its peak of 2008. The superior performance of the Japanese economy relative to that of the euro area occurred during a period of less fiscal deterioration. The gross government debt-to-GDP ratio of the Asian country increased by 10 percentage points – during the four years after its stock market collapsed – to 77.3 percent in 1993 from 67.3 in 1989. The experience of the euro area has been much worse. Its aggregate debt-to-GDP ratio rose by 21.7 percentage points to 88.1 percent at the end of 2011 from 66.4 percent at the end of 2007.

As Mark Twain reportedly quipped: “History doesn’t repeat itself but it does rhyme.” ECB economists, in their analysis of the Japanese experience in the central bank’s monthly bulletin for May, published yesterday, wrote: “As banks struggled with bad debt for years, they curtailed lending to new firms, which led to distortions in the allocation of credit and ultimately exacerbated the financial crisis and postponed a sustainable recovery.” That description would fit the euro-area situation if the words “bad debt” were replaced with “raising capital”.

European policy makers have failed to implement some of the reforms that also proved elusive in Japan. The staff economists stated: “The strong emphasis traditionally placed on job security in Japan may have reduced flexibility by hampering sectoral adjustments in the economy.” This time, only one word needs to be changed to describe the euro area. That is “Japan”. The fiscal problems are also comparable. The analysts in Frankfurt said “deteriorating revenues and rising social security spending also contributed to the increase in the fiscal deficit in the early 1990s. To consolidate public finances, the government raised value-added taxes in 1997 with the onset of the Asian crisis, which some observers regard as having postponed the recovery.” Demographic similarities are striking as well. The authors of the analysis wrote: “The Japanese economy faced unfavourable demographic developments from the 1990s onwards, as the working-age population reversed its previous growth trend and started to decline.” The staff economists should report their findings to the Governing Council. They concluded: “Despite initial room for maneuver before reaching the lower zero bound of interest rates, monetary policy responded slowly to the crisis, partly because – even two years after the stock market crash – the central bank (had not) anticipated a protracted slowdown of the economy. As inflation expectations also remained low…credit contracted. During this period, the effectiveness of the monetary transmission mechanism may have been impeded by the underlying problems in the private sector, which were not tackled by regulatory authorities.”

Click to enlarge:

Source:
Bloomberg BRIEF
Economics – News, Analysis & commentary

Following up on a previous matter, Karl Denninger  posted what is supposed to pass for a rebuttal to my recent post on government spending. To my eyes, as Jay Bookman so aptly put it, it looks like “the octopus trick, squirting black ink to cloud your retreat.” True enough. Anyway, done with that discussion.

Paul Krugman presents a chart in his new book, End This Depression Now, that just screamed at me for replication and a bit of enhancement, so here it is. Professor Krugman wrote about the ongoing cries of the bond vigilantes, who have been warning for about three years running that we were on the cusp of runaway inflation and skyrocketing interest rates any day now. I have documented this a bit myself over the past three years (in response to Bowyer and Laffer  here in July 2009, and again here last year), but Professor Krugman’s chart inspired me to revisit this topic.

Below is a chart of the US 10-year Treasury, including clearly marked points in time at which we heard from various vigilantes (including, regrettably, President Obama). The 10-year yield at the time of the comment is indicated.

Source: St. Louis Fed, Series DGS10. Markers placed on a best efforts basis.

In chronological order:

May 2009, The Wall Street Journal, The Bond Vigilantes. 3.67 10-year. Money shot:

It’s not going too far to say we are watching a showdown between Fed Chairman Ben Bernanke and bond investors, otherwise known as the financial markets. When in doubt, bet on the markets. [Ed. note: Assuming the Journal still believes an investor's best bet is "on the markets," what would be its advice now with a ~1.84 (May 8 close) 10-year?]

June 2009, Arthur Laffer in The Wall Street Journal, Get Ready for Inflation & Higher Interest Rates. 3.81 10-year. Money shot:

Reduced demand for money combined with rapid growth in money is a surefire recipe for inflation and higher interest rates. The higher interest rates themselves will also further reduce the demand for money, thereby exacerbating inflationary pressures. It’s a catch-22. It’s difficult to estimate the magnitude of the inflationary and interest-rate consequences of the Fed’s actions because, frankly, we haven’t ever seen anything like this in the U.S.

July 2009, Jerry Bowyer, in National Review Online, We’re All Inflation Hawks Now. 3.63 10-year. Money shot:

But what happens when the [monetary] floodgates open? At some point the banks will have to release a river of liquidity. Consumers are demanding it, Congress is demanding it, and even President Obama is demanding it. (That last one may well be the clincher.)

November 2009, President Obama, Interview with Fox News. 3.33 10-year. Money shot:

“I think it is important, though, to recognize if we keep on adding to the debt, even in the midst of this recovery, that at some point, people could lose confidence in the U.S. economy in a way that could actually lead to a double-dip recession.”

December 2009, Morgan Stanley Sees 5.5% Note as U.S. Faces Deficits. 3.69 10-year. Money shot:

The surge will push interest rates on 30-year fixed mortgages to 7.5 percent to 8 percent, almost the highest in a decade, Greenlaw said.

March 2010, Wall Street Journal (as a news story, not an editorial), Debt Fears Send Rates Up. 3.84 10-year. Money shot:

And some argue that the bond market has been too confident about these longer-term rates remaining low, at a time when the economy is slowly improving and the government is running huge budget deficits.

April 2011, Bond King Bill Gross, LA Times, Gross Boosts Bet That Treasury Bond Yields Will Surge. Even the best and brightest make mistakes. 3.52 10-year. Money shot:

As the U.S. Treasury gets set to issue another $66 billion in notes and bonds this week, Pimco bond guru Bill Gross has a message for potential buyers: Stay away.

August 2011, Standard & Poor’s downgrades the credit rating of the United States. ~2.50 10-year.

Now, there’s getting it wrong because you modeled it wrong, and getting it wrong because you’re a political operative first and economist or market pundit second. Both are on display above. The political operatives, who to this day are still making noise about Weimar in the United States tomorrow, simply refuse to acknowledge the mechanics of a liquidity trap. I know Gross, to his great credit,  has done some very public navel-gazing on this matter. Too bad the same can’t be said for the likes of Bowyer, Laffer, or the Journal.

@TBPInvictus

Doug Kass on Donald Luskin:

Many are concerned that a combination of higher tax rates and lower spending puts the U.S. on a fiscal cliff at year-end. (CNBC’s Maria Bartiromo has been particularly vocal about the subject.)

On the tax point, Don Luskin wrote an op-ed in The Wall Street Journal over the weekend, entitled “The 2013 Fiscal Cliff Could Crush Stocks.”

The essence of Don’s view is, “Do the math on dividend taxes. Yields lower, stock prices lower—maybe by 30%.”

My reaction to the article is that it is hyperbolic and that the analysis (that the dividend tax rate will rise from 15% to 43.4%) is wrong-footed.

Most significantly, the author assumes that 100% of all dividends received by investors are taxed.

This is plain wrong.

Most industry observers calculate that less than one quarter of dividends (between 20% to 25%) are paid out to taxable investors. The balance, or 75% to 80%, are paid to non-taxable investors such as IRAs, pension plans, charitable institutions, etc.

If we make the above adjustment to reality, Don Luskin’s vulnerability of stock prices drop to only 7% (22.5% of a 30% hit).

As well, it is highly unlikely that the tax rate on dividends will triple as the Obama administration has already signaled that this item is open to debate. (And obviously, if Mitt Romney is elected, he will oppose the increase and, at the very least, limit the tax rate rise on dividends to probably something close to the capital gains rate of 20% to 25%.)

Net-net, if the dividend tax rate is increased to the capital gains rate, the calculus is that the potential or theoretical hit to stock prices is closer to 2%, not the 30% that Don Luskin suggests.

Finally, if the dividend tax rate is hiked, corporations will react by substituting some portion of their dividend payments with broader share repurchase programs. (When the dividend tax rate was initially cut to 15%, corporations more aggressively raised dividends and cut back share repurchase activity.)

At James Montier‘s CFA presentation, he used one of my favorite quotes:

“Science advances one funeral at a time.”

-Max Planck

I would add to that:

If only economics were so fortunate . . .

Geithner channels Greenspan and Airbrushes Fraud out of our Crises
William K. Black

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On April 25, 2012, Treasury Secretary Geithner made remarkable statements about the role of elite financial fraud and greed in producing our recurrent, intensifying financial crises.  In this first installment I focus on the first of five problems with Geithner’s claims: (1) he does not understand the causes of prior crises, (2) he does not understand the causes of the ongoing crisis, (3) he does not understand that if he were correct about the first two points our nation would be in even greater peril and the urgency of Geithner leading a radical transformation of finance and regulation would be greater still, (4) he is not correct that we are prosecuting the elite criminals who drove the ongoing crisis, and (5) the media continues its nine-year pattern of failing to challenge Geithner’s fictions and his failures to lead the radical transformation that he should be desperately seeking given his stated beliefs about the causes of financial crises.

Here are the specifics of what Geithner said about financial crises, fraud, and greed.

“The wheels of justice are turning now,” Geithner said at an event in Portland after touring a factory there. “They are not turning as fast as people would like, but we have the best system in the world for making sure we can enforce the laws of the land,” he said.

Geithner suggested that holding people accountable for the wreckage caused by the recent housing collapse and the ensuing financial meltdown was not that simple since most crises were not caused by criminal activity.

“Most financial crises are caused by a mix of stupidity and greed and recklessness and risk-taking and hope,” said Geithner, who helped tackle the crisis for the Bush administration when he was the head of the New York Federal Reserve and has been urging Europe to act more aggressively to contain its debt problems.

“You can’t legislate away stupidity and risk-taking and greed and recklessness. What you can do is make sure when it happens it does not cause too much damage and to do that you have to make sure you have good rules against fraud and abuse, better protections and you force banks to hold more capital against their risk,” he said.

Geithner’s first claim is that “most financial crises” are caused by non-criminal acts.  “Stupidity” is the lead cause of financial crises, compounded by “risk-taking and greed and recklessness.”  Fraud does not even make Geithner’s list of contributing factors to financial crises.  The U.S. has experienced three recent financial crises – the S&L debacle (which is the subject of this first installment), the Enron era frauds, and the ongoing crisis.  Accounting control fraud is the leading cause of each of the crises.  “Control fraud” is the term white-collar criminologists use to refer to frauds in which the person controlling a seemingly legitimate entity uses it as a “weapon” to defraud.  Accounting is the “weapon of choice” for elite financial frauds.  Control frauds cause greater financial losses than all other forms of property crime – combined.

Three preliminary comments are in order.  First, Geithner was selected to be the President of the Federal Reserve Bank of New York (FRBNY) in 2003.  The President of the FRBNY has the second most important position in the Federal Reserve System.  It is essential that the FRBNY President study and understand the causes of financial crises.  Geithner had ample time and incentive to conduct such a study.  Second, no one challenged Geithner when he (implicitly) claimed that fraud was not even worthy of mention or consideration as a contributor to financial crises.  Third, even if Geithner were correct that fraud was only a relatively small contributor to the Great Recession that would provide no basis for not prosecuting the elite frauds who made that illegal contribution.

It is useful to expand slightly on the second point.  No one appears to have asked Geithner how he came to believe that “stupidity” is the primary cause of financial crises.  I am flabbergasted at the claim.  The individuals who are principally responsible for the crisis (whether due to their stupidity or fraud) are the CEOs of the largest financial institutions who made, purchased, pooled, and resold as collateralized debt obligations the pervasively fraudulent liar’s loans that drove the crisis.  The enormous extent and growth of liar’s loans and their endemically fraudulent nature is not in dispute.  The green slime that drove the crisis is not at issue.  The only issue is why the CEOs made and purchased vast amounts of loans they were repeatedly warned were fraudulent and sure to cause catastrophic losses as soon as the housing bubble stalled.  Assume solely for the purposes of analysis that Geithner is correct that they did so because of stupidity rather than fraud.  That assumption requires the CEOs of Countrywide, Ameriquest, Indymac, WaMu, Fannie, Freddie Mac, Fannie Mae, Lehman, Bear Stearns, Merrill Lynch, Wachovia, Bank of America, Citicorp, and all the largest mortgage banks to have been terminally “stupid.”  It also requires the boards of directors of each of these entities to have either been so stupid that they failed to notice that the CEO was stupid or so devoid of integrity and respect for their fiduciary duties that they were indifferent to their CEO’s stupidity.  Geithner’s assertion also requires that the regulators to have been so stupid or so insipid that they could not recognize that the CEOs were terminally stupid or so indifferent to their oaths of office that they did not object to stupid CEOs running the largest financial organizations in the United States.  Since Geithner dealt personally with these CEOs, his assertion, if true, would require him to either be stupid or indifferent to his oath of office.

That’s a lot of abject stupidity among the most elite CEOs – drawing an average salary of about $10 million annually in compensation for their stupidity.  The boards, the regulators, the media, and shareholders are incapable of recognizing the CEOs stupidity.  Everyone suspended disbelief and emulated the fools in the movie “Being There” who treated Peter Seller’s character’s (Chance the Gardener’s) inane ramblings as profound pearls of wisdom.  If Geithner is correct, big bank CEOs never shave with Occam’s razor – and stupidity is omnipresent in the C-suites.  Geithner also doesn’t seem to view it as particularly alarming that many of most elite CEOs are paid hundreds of millions of dollars as rewards for their surpassing stupidity.

Geithner does not reveal, and the media lacked the curiosity to ask, how he determines the answers to questions as essential to the performance of his duties as “why are we suffering recurrent, intensifying financial crises?”  I will explain how I approached that question when it was essential to the performance of my duties upon becoming an S&L regulator on April 2, 1984.  I decided that it was critical to study what was causing over one S&L per week to fail.  I was the newly minted Litigation Director of the Federal Home Loan Bank Board (Bank Board) and every failure came across my desk so that I could (1) prepare to defend a legal challenge to our placing failed S&Ls in receivership and (2) determine whether we should sue the failed S&L’s officers, directors, and professionals because acted negligently or fraudulently.  We called the process the “autopsy” and I was the “chief coroner.”

We decided that the financial autopsies provided us a priceless opportunity to study systematically the causes of the failures and to search for patterns and indicators that we could use to spot the frauds prior to their failures and to prove that they were frauds.  This required us to distinguish between officers who were fraudulent, stupid, or engaged in high risk, but not illegal, “gambles for resurrection.”

To assist our analytics we worked with agency accountants, appraisers, real estate experts, and economists to provide multidisciplinary lenses with which to understand the failures.  We also worked closely with the examiners who best knew the facts about the individual institutions.  The examination reports and supervisory files contained the failed S&Ls’ officers’ explanations and attempted rebuttals of the examiners’ criticisms.

We did not know we were doing it (because no agency has a “Chief Criminologist”), but we had implemented the suggestion of two researchers who studied elite white-collar crimes and proposed two years earlier that investigators develop analogs to CSI-style crime labs to study elite white-collar crime.  Wheeler, S., Rothman, M., 1982. The Organization as Weapon in White Collar Crime.  Michigan Law Review 80, No. 7: 1403-1426.

We found that there was a distinctive fraud pattern, that the frauds used accounting as their “weapon of choice” (a metaphor that we also developed in parallel to Wheeler and Rothman), and that they followed a fraud “recipe” that was a “sure thing.”  The recipe had four ingredients:

1. Grow like crazy
2. By making really crappy loans at a premium yield
3. While employing extreme leverage, and
4. Providing only trivial allowances for loan and lease losses (ALLL)

The recipe produced three sure things.  The S&L was certain to report extreme (albeit fictional) income in the near term, the CEO would ensure that the S&L adopted a plan of executive compensation that would turn the fictional reported income into real wealth to the CEO, and the S&L was certain to suffer catastrophic losses because the loans had a negative expected value when made.  These three “sure things” allowed us to understand several things that proved critical in containing the S&L debacle, which was growing rapidly in 1984.  One, we realized that “risk” as we conventionally conceptualize it in finance had nothing to do with the frauds.  Optimizing the recipe, by making loans at a premium yield, caused them to make loans that would have been exceptionally risky for an honest lender, but the risk was irrelevant to the frauds’ decision-making.  Looting is liberating for the CEO.  The frauds weren’t engaged in an honest gamble for resurrection.  They were following a strategy that ensured they could loot the S&L and walk away wealthy when it failed.

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Via XKCD

How awesome is this treasure trove of emails, documents, files et. al placed online by the NY Fed?

Some of the emails between Lehman execs are laughable — naive, silly, hubristic, childish.

But my favorite piece simply has to be the Morgan Stanley research report from June 30 2008 “Overweight Rating” on Lehman Brothers — “Bruised, Not Broken, Poised for Profitability“. 60 days later, Lehman Brothers filed what was thent he largest bankruptcy in the United States.  This is (literally) what the category “Really Really Bad Call”  was invented for.

Who was the author of this steaming piece of shit, and where is he today? Why, he is Patrick Pinschmidt, and he is a Senior Policy Advisor at U.S. Treasury Department! (You could not make up stuff this un-fucking-believable even if you tried).

Total awesomeness!  (Hat tip Josh)

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click for full document dump

I’ve been meaning to address this for some time, and today is as a good a time as any.

Over the years, I  have participated in interviews at Yahoo Finance — its always a fun time, Aaron Task, Jeff Macke, Henry Blodget, Dan Gross & Co. are very sharp guys. Its usually a short, smart interview with insightful questions and fun topics.

Then there are the Yahoo (almost message board) comments.

I cannot tell you what a wonderful tell — just top notch contrary indicator — these have been over the years. Check out Sucker’s Rally Alert: Dow Going Below 10,000 (Aug 12, 2008) — its too bad that when they redid the site, Yahoo lost the Incredibly Bullish comment stream, just as we were heading right into the collapse.

The opposite played out, on March 9th 2009: “Big Bear Market Rally Coming,” Says Noted Bear Barry Ritholtz (recorded March 9th webcast Mar 10, 2009 08:35am) The comments were incredibly negative to any sort of good news.

More recently, we did Bear Days of August Might be Over, Says Barry Ritholtz in September 2010, just as QE2 was ramping.  (These comments were not much better: House Prices Are Still 10% Too High, Says Barry Ritholtz).

Which brings me to this week’s appearance. 2 negative pieces, one positive

-U.S. Economy Right Where It’s Supposed to Be, Ritholtz Says

-Despite Falling Prices, Housing Sector Is Recovering. Really.

-America Is So Not In Decline: Ritholtz

You have to go read some of the comments — especially on the America Is So Not In Decline  — they are simply hilarious examples of cognitive foibles, selective perceptions, bias and just plain human silliness you will ever see. I tried pushing back on a few of them, but its a tide of ignorance, and I only have 2 thumbs to stick in the dike.

Read ‘em and understand why most investors under-perform . . .

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Previously:
You MUST read the comment streams at Yahoo Tech Ticker (September 3rd, 2010)

Prior to law school, Hale Stewart was a bond broker with Vining Sparks, where his clients were comprised of mutual funds, insurance companies and money managers. He graduated from the South Texas School of Law in 2003. He continued his education at the Thomas Jefferson School of Law in 2007 where he obtained an LLM in domestic and international taxation, graduating Magna Cum Laude. He has three certifications from the American Academy of Financial Management: Chartered Trust and Estate Planner, Chartered Wealth Manager and Chartered Asset Manager. Mr. Stewart is also a member of the AAFM’s Board of Standards. He is the author of the book U.S. Captive Insurance Law and is currently working on his Ph.D..

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From the Financial Times:

“We can only win back confidence if we bring down excessive deficits and boost competitiveness,” he said. “In a such a situation, consolidation might inspire confidence and actually help the economy to grow.”

The above statement shows why austerity is simply one of the dumbest policies on the planet.  First, The EU region was already growing at a slow rate when people started to talk about austerity.  Consider the following chart:

Since the end of the recession, the best seasonally adjusted annual rate of growth (SAAR) is 2.4%.  But that figure is really an outlier; looking at the chart we see that the rate of growth can be broken down into two time periods.  The first — the five quarters coming out of the recession — growth was actually OK; it averaged 1.78% while the median number was 2%.  But since then — when the continent decided to implement austerity — the growth rate slowed.  Either way, growth was not strong enough for the economy to achieve “escape velocity” — a rate of growth that creates a self-sustaining, private sector led growth rate over 2.5%.  As a result, unemployment hasn’t dropped, but instead has risen:

Coming out of the recession, we see increased unemployment — which is to be expected, as unemployment is a lagging indicator.  However, since then unemployment hasn’t dropped, indicating that the economy hasn’t hit that critical growth level where employment picks up.  In fact, we see unemployment increase overall,  

INDICATING THAT AUSTERITY IS FAILING.

So — what was the policy response?  Cut spending in the hopes that would “inspire confidence” so that the economy would grow.  The problem with this is simple.  It completely runs counter to what is needed — spending.  Again, consider the GDP equation

C+I+X+G=GDP

Consumer spending and investment drop in a recession and in the quarters coming out of a recession.  Exports help, but they’re not the predominant component of GDP.  That leaves government spending to pick-up the slack.  And there is plenty of room to do this.  Consider the following chart of the EU debt/GDP level:

It currently stands at 85% — hardly crisis levels.

And we haven’t even mentioned the worst part yet: the overall economy is now probably in a second recession, largely caused by slowing demand, caused by (drum roll please) austerity!  And, worst of all, the economy may be entering a negative feedback loop: low demand leads to more unemployment which leads to lower demand … you get the idea.  

As for the whole “confidence will return” argument: businesses don’t invest in slow-growth environments when there is obviously slack demand.  Put another way, ask yourself this question: would you rather sell your product into a market that has 2% SAAR or 3.5% SAAR?

Also consider this from the NY Times:

With political allies weakened or ousted, Chancellor Angela Merkel’s seat at the head of the European table has become much less comfortable, as a reckoning with Germany’s insistence on lock-step austerity appears to have begun.

“The formula is not working, and everyone is now talking about whether austerity is the only solution,” said Jordi Vaquer i Fanés, a political scientist and director of the Barcelona Center for International Affairs in Spain. “Does this mean that Merkel has lost completely? No. But it does mean that the very nature of the debate about the euro-zone crisis is changing.”

A German-inspired austerity regimen agreed to just last month as the long-term solution to Europe’s sovereign debt crisis has come under increasing strain from the growing pressures of slowing economies, gyrating financial markets and a series of electoral setbacks.

Spain officially slipped back into recession for the second time in three years on Monday, after following the German remedy of deep retrenchment in public outlays, joining Italy, Belgium, the Netherlands and the Czech Republic. In the Netherlands, Prime Minister Mark Rutte handed his resignation to Queen Beatrix on Monday after his government failed to pass new austerity measures over the weekend.

The political upheaval drove stock markets on the Continent sharply lower, with Germany’s DAX index finishing the day down 3.4 percent. The sell-off in Europe dragged American indexes down around 1 percent. A survey of European purchasing managers showed an unexpected plunge in confidence this month.

The Netherlands, a staunch supporter of the German position, became the latest European country forced into early elections by the European crisis, just one day after the first round of presidential voting in France raised the possibility that the incumbent, Nicolas Sarkozy, would be unseated by his Socialist challenger, François Hollande, in a runoff election.

 From trading floors to polling stations to the streets of cities across Europe, the message appears increasingly to be that countries cannot cut their way to fiscal health. They need growth, too. In recent months, powerful voices have joined the chorus, including those of the managing director of the International Monetary Fund, Christine Lagarde, and Italy’s prime minister, Mario Monti. Treasury Secretary Timothy F. Geithner has called repeatedly for Europe to defer budget cutting in favor of some form of stimulus spending

OK, so people have put their hand on the stove, turned the heat on an learned that its hot.  Wow — hardly a new concept to people who read this blog, but obviously to people who haven’t learned a damn thing from history.  Anyway, it’s good to see sentiment changing, but we’re still not out of the woods.

See also this post at Brad DeLong, which links to Professor Krugman.

PART II AFTER THE JUMP

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I have been hearing this tired line since 2006. Its time to retire it as a misleading foolish bit of money-losing misdirection.

Lets take a look at the full price index — 1987 to 2012 — and I have boxed off the section I want to focus on:

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If we were to zoom in on that box covering the peak downwards, it looks like this:

click for ginormous version

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Its pretty self-evident that claiming a data series is 2 months old during a 72 month slide borders on insanity. The overall trend has been devastating, the entire 60 day lag down . . .

What about prices and homes sales stabilizing?

Well, not exactly — even that bottom scraping that looks like stabilization is the result of a massive concerted effort between multiple bailouts, fed actions and tax credits:

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Source Street Talk Live by way of Charles Smith

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Previously:
Closer Look at the Housing Recovery Meme in 5 Parts (April 17th, 2012)

1. Debunking the Housing Recovery Story: Shadow Inventory.
2. Home Affordability Reality Check: Can Buyers Afford Homes?.
3. The Problem With Home Prices (Still too high).
4. Foreclosures: A Decade Long Overhang.
5. Fear of Buying: The Psychology of Renting.