Monday, May 24, 2010

This Is Not A Good Sign:

From Bloomberg:  Banks Seek $10 Billion of Bids in Effort to Sell Bad Mortgages
As more banks explore selling soured housing debt, a smaller share of the loans that they are considering off-loading are actually being sold, Daurio and Goodwin said. Instead of one in five potential deals turning into DebtX auctions, “that ratio has gotten worse recently,” Goodwin said during the session. LINK
Despite the lipstick put on this pig by "experts" quoted in the article, the reality is that mortgage delinquencies and defaults continue to climb and banks are looking to unload as much of this crap-ass paper as they can before they have to start tapping into their excess reserves at the Fed in order to monetize the problem.  Let's not forget that a large part of bank profits since last year have been derived from marking up the holding value of assets like distressed mortgages.

Although the banking sector was slammed today - the BKX bank index was down 3.2% - Wells Fargo stock was hammered for 4.6%.  WFC is a large purveyor and holder of the nuclear explosion mortgages known as pay-option ARMs.  The stock performance today in the financial sector likely reflects the deteriorating financial condition of the United States.

On a related note, some idiot disguised as a financial expert on CNN Headline News, Clark Howard, was on today gleeflully explaining to viewers that the housing market was going lower now that the housing tax credit expired and it was great time to buy because prices were dropping by as much as 10% in some areas, as people who weren't able to sell to tax credit buyers now look just to sell before they default.  How would you like to be one of those poor slobs who was aggressively cajoled into buying some beater of a home by his broker in order to take advantage of the tax credit and "good prices," and and then turn on CNN to hear that now your purchase closed, the value of your home has probably already dropped by about 10% - which factors in 8.5% for the tax credit plus another 1.5% because of the inventory that is now flooding the market.  Many homes around my area in Denver are now sporting "price reduced" signs on top the realtor sign in front.

The housing market is on the edge of another cliff dive.  The policy makers have completely misjudged the effectiveness of the tax credit program as a means of "jump starting" the housing market.  Expect the Fed to roll out another massive money printing program, using Europe's woes as the cover excuse.  But we all know by now that the problems in Europe pale compared to the brewing financial/economic disaster in this country.


  1. I had no idea the banks had any bad mortgage paper left; I thought it was all parked at the FED! Shocker!

    I find it hilarious that idiots who ran out to grab an 8k tax credit for a home will be underwater by 2-3X that amount in about 3 months. Another example of fine American economic sense.

  2. Don't worry right on que Spain is moving front and centre to give cover for this move.

  3. Do not leg-in to the AUS or CAD yet!!
    More USD upside coming.

    We have lots more downside in the commod currencies before we pull the trigger on that trade.

    We will get more torque from our trade going forward. Stand by for big deals and don´t suffer from premature speculation. Don´t waste soldiers and bullets pulling the trigger too soon.

  4. Here's something for your consideration. It's not entirely OT, but then it's hardly far off either.

  5. The "Gold Versus Paper" blog comes up as not found. Weird.

  6. I just tried linking onto goldvspaper off of another site and got the same thing: "not found"

    maybe he took it down to re-design it or someting.

  7. The USD is putting in the boots AGAIN today.

    Hold onto your USD´s lads they´re going to be buying us alot more of what we want going forward.

  8. DnD, I noticed the same thing happening here in one of the "hotter markets" in D'never-Platte Park. The spec artists just flipped their motel 6 style renovation across the alley, after the greedy relations moved my 90 year friend Phyllis outa there and dumped the place for $220 K. The specs swooped in, put in maybe $50 K and put it on the market for $399 K!! To my astonishment it sold in two days to a young couple w/kid! Grandpa Warbucks supplied the huge down and then some. Money to burn apparently. Like with so many other things economic they must be living on another planet. Meanwhile the short sales here are coming fast and heavy.

  9. yf, Platte Park has held up reasonably well, at least the area west of Downing and east of Sherman. But I'm starting to see a lot of for sale/price reduced signs popping up.

    the area that's more the DU area east of Downging is starting to get hammered.

    Go drive all around the Cherry Creek north 'hood. Omigosh some blocks look like those areas on SoCal/Florida where there's just a whole block of for sale signs lined up. over on like Monroe or Madison between like 1st and 3rd, i saw a 3-pack of luxury townhomes with a "make an offer" signs on top of the for sale signs LOL

  10. I agree that we're on the edge of another plummet, but disagree that the US is worse off than the EU. The EU has no internal cohesion other than that which is enforced by the elites -- the Greeks are pissed off at the others for forcing austerity measures on them, the Germans are pissed off at the profligacy of Greece, the Baltics (who, oddly, have been ignored in the news for a while) are falling apart trying to conform to the EU's requirements for entry into the Eurozone, and there are a dozen more crises where those came from. Meanwhile, Russia is re-Sovietizing itself, and although Russia has its own severe economic problems, that doesn't seem to be much of a deterrence to Putin when it comes to invading Georgia and interfering in Ukraine.

    In the US, we have financial problems out the wazoo, but we have a large buffer of illegal aliens we can deport if we really want to have a jobs program -- positions in construction, meat processing, and light industrial will open up all over the place -- and we have the capability to be largely self-sufficient (other than oil) if we'd only develop the political will to do so.

    On our worst day, our economy is among the most energy-efficient of the industrial economies, we have enormous coal reserves, we *could* reprocess nuclear fuel and build more nuclear power plants, and we can feed ourselves without any problem (in fact, blimping out is a bigger worry).

    If we'd just get our politicians and the leeches they enable (unions, illegals, and welfare trash, for starters) in line, we'd be in decent shape.