Wednesday, June 2, 2010

Mortgage Purchase Index And Other Nuggets Of Golden Truth

The Mortgage Bankers Association index of mortgage applications showed, on an unadjusted basis (I don't recall CNBC or Bloomberg reporting the raw, unadjusted number) was down 5.2% from week before. In the MBA's words: "The Purchase Index decreased for the fourth consecutive week and is currently at the lowest level since April 1997." Not only that, the index is down 40% from its level four weeks ago. Here's the link:  Mortgage Purchase Applications In A Cliff Dive

Anyone see a problem here?  The housing purchase tax credit had the effect of pulling a lot of home sales forward into March and April from the summer months.  Unless they resurrect the tax credit (can the Treasury really afford to use taxpayer funds to pay for home sales with all the other trillion dollar problems), expect to see home sales go off of a cliff this summer, right in the heart of the home selling season.  I know of a couple of  formerly successful real estate brokers who are now struggling to make ends meet.   I am also, anectdotally, seeing a LOT of "for sale" and "price reduced" signs pop up all over Denver...

Does anyone besides me find it to be rediculous that Warren Buffet, who owns Moody's stock, was defending the rating agencies today in front of the Financial Crisis Inquiry Commission and defending the agencies' failure to anticipate the subprime crisis?  You have to be kidding me.  Talk about disingenuous.  How can Buffet take credit for being an investment genius and yet feign ignorance over this matter?

The rating agencies have been engaging in fraudulent ratings, in collusion with Wall Street, for over a decade that I'm aware of.  Back in 1995 I was on a junk bond desk and I watched an ex-Drexel salesman take his buddy from Moody's out to Chanterelle for lunch and then to a fancy New Jersey country club for a round of golf in exchange for Moody's giving a bond deal we were doing a B3 rating instead of a Caa rating.  That rating allowed the deal to get done.  Make no mistake about it, rating agencies were fraudulent entities long before the subprime catastrophe became its coup de grace.  Here's a link to Buffet's puke if anyone is interested:  Yeah right!

And finally, I'm linking an excellent commentary by my colleage "Jesse" of  Jesse's Cafe Americain.  He opines that based on Obama's patronizingly populist speech today that we can expected another "hot" employment report on Friday and then goes on to point out Obama's words belie the golden truth: 
He speech sounded good. And if you do not look too closely at what is going on, and how things are being run, and the lack of actual reform, you might have had a feel good moment. It was about as effectively staged as the case that George W made to the American people for the invasion of Iraq. And it was probably just as phony and self-serving.
Here's the link and I recommend reading it:  Obama And Staging Appearance vs. Reality


  1. So, a strong jobs report coming.
    Do we see a concerted down draft on gold price coming, however brief?

  2. Home sales will go way down this selling season, but that has got to be bullish. More pent up demand?

    Buffet defending the ratings agencies is ridiculous, but not when you consider the overall circus we have.

    That jobs number will come in hot one way or the other.

    And the US mint is out of silver as usual.

  3. gyc, zerohedge lept before they looked. the mint suspended production of proof coins. they are definitely running out of gold/silver blanks and silver eagles have been on allocation to coin dealers since last week. that comes from "the horse's" mouth.

  4. Anonymous - gold is going to experience price volatility to the upside and the downside as the price climbs. I am on record saying that I belive we will have a surprise counter-seasonal move a lot higher in the metals this summer. If you trade the juniors, you can "feel" that the bid side is become sturdy and the path of least resistance is no longer down...

  5. Color me confused. Buffet on the ratings agencies.

    "They made the wrong call," Buffett acknowledged.

    But he said he counted himself among those who failed to foresee the collapse of the housing bubble. Buffett called it the "greatest bubble" he had ever seen.

    The greatest Bubble he had ever seen, and he made the wrong call on it? What does that even mean?

    The world's smartest (ie most connected) investor made the wrong call. Aw shucks, even that folksy gentleman from Nebraska didn't see the greatest bubble he had ever seen coming.

    While everyone is getting rich, no one sees anything.

    Is it perjury when the smartest minds in the world (some of them) say they never saw a bubble...when it was obvious to so many?

  6. Buffet's losing it, he is just protecting his investment.

  7. If you trade the juniors, you can "feel" that the bid side is become sturdy and the path of least resistance is no longer down...

    Cmon on Dave. The juniors and explorers are cratering.

    Take a good look at the tsx.v. It looks shite.
    Summer is a terrible season for Vancouver stocks.

    It will be a great time to buy soon.

  8. Yeah, and Iran is getting tired of getting paid for oil in Euros, so is converting a few billion Euro into gold and the US dollar. That should be good for gold - would the US put up sanctions to stop Iran from buying USD? Hmmm is "sanctions" a derivative of "sanctimonious"? Those darn derivatives eh?

  9. Anonymous - the juniors have already cratered. The ones I own and trade are starting to feel their bottom.

    A colleague of mine bought over 100k SDRG and it took him almost all day to get that done in the context of .20 - .22.

    It took me over 3 hours to get filled on a measly 5k of EMX.V and I had my bid mid-market.

    Soon enough the illiquidity will come from the sell-side of the equation and the stocks will start gapping higher again.

  10. Buffet talks his book and speak sout of both sides of his mouth at once. Look at the derivatives thing. "Weapons of mass financial destruction." And yet his insurance sub General Re was/is riddled with derivatives. Same with Wells Fargo. I guess when you're as rich as he is you can be an complete hypocrite, an outright liar, and the sheeple will still lick your balls.

  11. Back in early 2005, Buffett sold one of two Laguna Beach vacation homes he owned — a 51-year-old, two-bedroom, ocean-view house in the Emerald Bay neighborhood — for $3.5 million. He bought this home in 1996 for $1.05 million, according to county records.

    Wrinkley Warren is a liar when he says he didn't see the housing bubble.

  12. Sorry, forgot to post his quote

    After he sold, Buffett told his annual shareholder meeting, “certainly at the high end of the real-estate market in some areas, you’ve seen extraordinary movement.” People go crazy in economics periodically,” he continued. “Residential housing has different behavioral characteristics, simply because people live there. But when you get prices increasing faster than the underlying costs, sometimes there can be pretty serious consequences.”