Camel's Back, Two Straws...

My dire prediction for the housing market is based on two recent developments. First is B of A's nationwide suspension of foreclosures. Expect this to spread until all foreclosures are halted for some indeterminate period. At issue is documentation, and whether anyone attempting to seize a house actually has the secured interest needed to legally foreclose.

This impacts not only pending and future foreclosures, but completed foreclosures. Also hit hard are past and pending purchases of foreclosed homes. If you bought a foreclosed home in the last couple of years, it's quite possible that the foreclosure wasn't properly documented, and title may now be in question. Among other things, this will develop into a title insurance crisis that could take years to resolve.

The second big development is the Countrywide Mortgage class action lawsuit. Among the many claims, plaintiffs have asserted that Countrywide and various retail lenders who wrote Countrywide paper deliberately shopped for high appraisals in order to overvalue properties. This will be easy to prove, as everyone familiar with this mess knows that "optimistic" appraisals have been used industry wide for at least the last decade.

That's called fraud. Every real estate transaction in America over the last 10-15 years is now in question, tainted by this universal practice. Many homes have changed hands two or three times in this time period, and every buyer has paid too much. They've been defrauded.

There's no statute of limitations on fraud, nor can such liabilities be discharged in a bankruptcy.

It's easy to demonize and marginalize subprime borrowers who can't pay their mortgage. But, how do you dismiss someone who did everything right, paid his loan on time every month but who was overcharged for his house? When those people realizes what happened, they'll sue. And they're sympathetic victims. Virtually every realtor, every appraiser, every mortgage broker and every bank in the country participated in this fraud, many knowingly and the rest looking hard in the opposite direction.

As this sinks in, the next realization is that the government was a willing participant. Government regulators looked the other way as taxes poured in from the incomes and purchases of contractors, realtors, appraisers, mortgage brokers and bankers, and from capital gains. Our government knowingly caused the mess, and was on the take from day one.

I expect a total loss of faith to follow on the heels of these revelations, and I doubt they can keep a lid on this until the election.

Slow Learners

Bloomberg reports a new form of subprime security: "asset-backed auto debt linked to loans to consumers with credit considered subprime"...

And investors, liking the high yields, are snapping them up.

End of an Era

Just saw an interesting statistic that drives home how far America has fallen as a manufacturing power: 2010 manufacturing employment is under 12 million. Last time manufacturing employment was this low was in 1941, before America ramped up production for WWII.

How will there ever be a real recovery, let alone a lasting recovery if we don't produce?

Housing Market: Fecal Matter, Meet the Whirly Thingie

Everyone knows that the summer months are the best months for residential real estate sales. So how did it go this year, in the summer of recovery?

2010 summer period: (June, July, August) 82,000 new homes sold (not seasonally adjusted). The worst summer sales period since record keeping began in 1963.

And how was August? Those numbers are just in, too:

2010: the worst August on record since 1963: 25,000 new homes sold (not seasonally adjusted). 1981 was the second worst August with 34,000 sales.

Yet the Dow is soaring(!). Perhaps the index should be loaded up with homebuilder stocks, so it could reflect reality...

A Few Statistics On That Pesky Recovery

1) (850 KOA Radio News) The unemployment rate here in Colorado rose three tenths of a percent in the last month.

2) (Federal Reserve) Americans lost $1.5 Trillion in household net worth in Q2 2010, which is the most recent data available.

3) (CNN) One in seven mortgages in America is at least delinquent if not in foreclosure.

4) (various) The residential foreclosure rate in August 2010 was 25% higher than in August 2009

5) (FDIC) Through August 2010, the annual bank failure rate is nearly 50% higher than it was in 2009 through August.

6) (AP) 2009 saw the highest increase in the poverty rate in America in the 50 years that the statistic has been tracked.

7) (US Gov) The number of Americans on food stamps has risen more than 50% in the last three years, to 41 million.

8) (NAR) There are 4 million homes currently listed for sale - a 12.5 month inventory.

9) (Moody's) Another 2 million homes will be seized by lenders between now and the end of 2011.

10) (Me) Boomers reaching retirement age at the rate of 4 million per year starting in 2011 will seek to downsize and simplify, adding far more high-end homes to inventory. That is, they will if they can get their damn kids to move out.

11) (Morgan Stanley) Nearly 8 million bank owned and foreclosure bound homes have yet to hit the market.

12) (Bloomberg) As of July 2010, sales of new and existing homes fell to the level on record.

13) (Me) The massive student loan debt of recent college grads, combined with limited job prospects, will prevent marriages, families and home purchases for years to come.

14) (Various) The problems in commercial real estate are far from over.

15) (Shedlock) There is little reason to hang onto an underwater home, and no reason at all to buy one right now.

16) (Me) Retiring boomers will begin to liquidate the stock that remains in their qualified plans, putting significant downward pressure on markets.

17) (Me) With younger Americans drowning in debt, the likely buyers for those stocks are furriners - Chinese and Arabs saddled with trillions of our declining dollars. Most American companies that aren't already foreign owned will be within 10 years.

18) (Me) Expect downward pressure on employment, wages, home prices, stocks and consumer spending for years - with luck a decade, much longer without.

19) (Me) Expect rising food/commodity prices and taxes during the same period.

20) (Me) There will be no recovery. Never. The burden of government debt guarantees that. You'll never again live in a period remotely resembling the last two decades of economic activity.

21) (Me) For those finding hope and change to be of low caloric value, I suggest stocking up on food, seeds, precious metals and ammo - pronto. This mess is just unfolding, and I suspect our only way out is forward through a collapse.

Hasta la vista, baby...

...and if you'll allow me one more, will Ahnold become a REAL Austrian (of the von Mises kind) in this, his final role?

Yes, Kali-fornia belatedly declared a state of emergency over their finances.

Yawn.

After decades of advance billing, it's here: "Terminator 9: Fiat Money" Now playing everywhere. It's the only show in town, and the last picture they'll ever make.

You vill vatch it, und you vill liff it.

Along the laugh cynically/cry/scream/commit suicide continuum, I generally favor laughter. This recipe (with a bit of a scream folded in here and there) keeps the blood pressure down and the blood not spilled, which only they want. The cynicism topping is my fuel-saving shortcut to the truth.

Hence, and with a sardonic grin, I'm of a mind to start a pool: Will it be force (farce?) majeure/default? A bailout? Bankruptcy? Perhaps, if God feels any mercy for the rest of us, a 9.8 earthquake???

Pick your poison(s) and a date, prize to be determined...

Me? I vote for all of the above, in that order, commencing as soon as possible. I really didn't need that label on my new pry bar telling me that it contains something known to you Carnacs of the Environment to cause cancer, as if I was going to chew on the damn thing or stir my soup with it. And then there was the inoperable nozzle on the last gas can I bought. That was the last straw. I could shove it up your a** (wanted to, at the time) and it still wouldn't spill a drop. And maybe that's the point. You've converted it into an environmentally friendly safe-sex toy, one that closely mirrors what you did to your oil industry and, come to that, your entire state. Now you can't even self-immolate, which would certainly be the honorable thing.

Somewhere along the way, your imported/minority vote robots will turn on you, and they're smarter than you think. Hell, they're clever enough to unscrew that nozzle, and they'll burn your lesbian gay bisexual transgendered worker's welfare paradise to the ground for lying to them all these years and then betraying them in "the hour of their need". You'll also see the faces of a lot of your public employees in that madding crowd, and I'm sure you'll be sincerely shocked that your cannibal class turned on you...

Not me. I'll probably have to break down and buy a new flat screen and subscribe to cable, just to see the show. You, the kleptocratic screwers, will become the screwees, reaping what you've sown for lo, these many decades. Act surprised all you want, but being as foreseeable as tomorrow's sunrise, the popcorn will be ready at my house.

Economic oblivion couldn't happen to a nicer bunch. I do resent my forced participation, but at least I get to watch you stop twitching first. Since I'm prepared, I'll be watching from a comfortable vantage point, laughing on a full stomach.

One final question - will the last one of you turn off the lights or will Arizona have to do even that for you feckless girly-men?

Hasta la vista, you little babies. You did it to yourselves. And no, you won't be back. You're too well-marbled for that.

Oh, Shit...

Fox News reports that the Mayor of Newark, NJ has ordered he city to stop purchasing toilet paper. We don't know how much that will save, but toilet paper must be a fairly significant budget item for something as full of crap as a municipal government.

They can always wipe with muni's, which were headed in that general direction anyway...

Meltup

Behold the latest work of the National Inflation Association, entitled "Meltup" in a clever play on inflationary meltdown.

It's a dire warning of looming hyperinflation and national bankruptcy. Well researched and documented, showing a lot of the details of the mess and blasting well deserved holes in government statistics. It'll make you angry, and it should:

Reality Check

OK, it's good to do a reality check now and then, just to be sure you rinse off all the media Kool Aid stains. (A quarterly review can't hurt anyone, can it?)

So, a few questions:

Are we done with the layoffs?

Are the decent jobs coming back?

Has the wave of foreclosures stopped?

Have home values really bottomed?

Is no-one upside down in their mortgage anymore?

Is the mortgage delinquency rate falling?

Is the shadow inventory of homes cleared?

Is the bankruptcy rate falling?

Are private pensions solvent?

How about public pensions?

Are the states solvent?

How about municipalities?

Are the toxic debts off the FED's books?

Are Fannie Mae and Freddie Mac out of the woods?

How about the FDIC?

And, is the wave of bank failures behind us?

Are the US automakers OK?

How about the bond market?

Is Medicare in the black?

How about Social Security?

Are banks back to lending?

Is the retail sector OK?

Is the energy picture good?

Are farmers/ranchers in the black?

Is the dollar sound?

Are the EU countries stable?

China?

Russia?

The middle east?

Heck - how about America - are WE stable?

Is wall street suddenly honest?

Is the government suddenly honest?

Is the government even under control?

Are the unfunded liabilities gone?

Are federal deficits back to a "reasonable" size?

Will Obamacare save money?

Is the media telling us the truth about anything (besides last night's low temp)?

Sorry. You know the answers. The DOW may be at 11,000 but I see no valid reason for it. If you like gambling, have at it, but I just don't see the value. The market is (allegedly) forward looking, so where's the acknowledgment of our predicament? If we're honest, America really looks like some kind of sick amalgam of Weimar Germany and Zimbabwe, with a little Soviet bureaucracy thrown in for good measure.

I've probably mentioned this book before, and if you haven't read it it's high time: "Extraordinary Popular Delusions and the Madness of Crowds." It's the first book any investor should read. Otherwise, your odds may be better in Vegas. I can suggest a few good chapters for the next revision of that classic: Union defined benefit pensions. Social Security. Tech stocks. The US Housing market and subprime lending. The Federal Reserve.

As Hitler observed: "What luck for the rulers that men do not think."

Annual Deficit: $2.65 Trillion?

Despite being a short month, February's federal deficit came in at $220.9 Billion. That's $2.65 Trillion a year.

Words fail me.

Taxes

Tax his land,
Tax his bed,
Tax the table
At which he's fed.

Tax his tractor,
Tax his mule,
Teach him taxes
Are the rule.

Tax his work,
Tax his pay,
He works for peanuts
Anyway!

Tax his cow,
Tax his goat,
Tax his pants,
Tax his coat.

Tax his ties,
Tax his shirt,
Tax his shoes,
Tax his dirt.

Tax his tobacco,
Tax his drink,
Tax him if he
Tries to think.

Tax his burgers,
Tax his beers,
If he cries
Tax his tears.

Tax his car,
Tax his gas,
Find some ways
To tax his ass.

Tax all he has
Then let him know
That you won't be done
Till he has no dough.

When he hollers;
Tax him some more,
Tax him till
He's good and sore.

Then tax his coffin,
Tax his grave,
Tax the sod in
Which he's laid.

Put these words
Upon his tomb,
Taxes drove me
to my doom...'

When he's gone,
Do not relax,
Its time to apply
The inheritance tax.

From Your Friends at Citibank...

...comes this great news:



Makes you want to rush out and deposit some money there, doesn't it?

Change You CAN Believe In

I would hope everyone has made arrangements before now, but if not:



I recommend pre-1965 dimes and quarters as backup currency. A silver dime has been able to purchase a can of soup ever since it was minted in 1964, and it still does today. A quarter should buy a simple meal, as in soup and a sandwich with a glass of water. (People all over the world live on much less.)

The problem with silver ounces, bars and any form of gold is making change. Unless the person you're trading with has a bunch of quarters and dimes of his own, you'll have a hard time getting change for your Krugerrand when you buy groceries.

If you're new to the game, I wouldn't even start on gold until I had hundreds of dollars (face) worth of US Mint 90% silver on hand. If you now have gold but no silver, the ratio is very favorable to trade.

My best advice is to befriend a local independent coin dealer and make regular small purchases as often as you can. It's getting late, so don't worry much about price. Precious metals are a storehouse of wealth, and wealth evaporation is the major problem looking forward from here. Keep at it - slow and steady wins this race.

More Thoughts on Gold, Chinese Style...

An interesting essay on recent "curious" behavior on the part of the Chinese government. I know that confiscation always looms, but it certainly challenges stereotypes to think that the (ostensibly communist) Chinese gov't may care a great deal more for the financial well-being of its' people (or at least their own nation) than the monkeys in DC.

A Glaring Half-Truth

I generally don't comment on any of the Boy King's sound bite utterances - to do so could quickly become three full time jobs and might imperil the available bandwidth. Today is an exception. In a whistle-stop photo-op speech at a small business he managed to strike a nerve.

In his freshly minted populist/outside observer persona, he stated that "there's a limit to what government can do"... That's only half true, and Barry knows it. There's certainly a limit to the good government can do, but there's no apparent limit to the harm they can do.

Keep struttin' around in your new clothes, Mr. Emperor - you do more in five minutes to wake this nation up than I could in a lifetime...

Social Security in the Red This Year!

With such high unemployment, payroll tax receipts will not cover SS expenditures this year. The interest we "pay" on the debt we owe SS is just a bookkeeping entry so no help there. Talk about the chickens coming home to roost...

When SS started under FDR, nobody could foresee the post war baby boom. At that time, they smugly believed it would produce current year revenue for the government in perpetuity. They even said so on the front page of the bill!

Once the baby boom hit (and our boom lasted 2x longer than in any other country that fought WWII) SS was mathematically doomed. Any junior actuary - basically just a math major with a bachelor's - could have told you as much since 1970 if not sooner.

Our baby boom demographics also guarantee that socialized medicine will be an expensive failure. US demographics already guarantee significant rationing of health care in the very near future. The only question is: should we involve government bureaucrats in this or are such difficult decisions best left to doctors and patients?

The downhill slide of America will be hard enough on all of us anyway - who needs more unaccountable government drones mixed into the health care equation???

Taleb Says to Short US Treasuries

From Bloomberg via BusinessWeek.com:

Feb. 4 -- Nassim Nicholas Taleb, author of “The Black Swan,” said “every single human being” should bet U.S. Treasury bonds will decline, citing the policies of Federal Reserve Chairman Ben S. Bernanke and the Obama administration.

It’s “a no brainer” to sell short Treasuries, Taleb, a principal at Universa Investments LP in Santa Monica, California, said at a conference in Moscow today. “Every single human being should have that trade.”

Taleb said investors should bet on a rise in long-term U.S. Treasury yields, which move inversely to prices, as long as Bernanke and White House economic adviser Lawrence Summers are in office, without being more specific.

The Fed and U.S. agencies have lent, spent or guaranteed $9.66 trillion to lift the economy from the worst recession since the Great Depression, according to data compiled by Bloomberg. President Barack Obama has increased the U.S. marketable debt to a record $7.27 trillion as he tries to sustain the recovery from last year’s recession. Obama projects the U.S. budget deficit will rise to a record $1.6 trillion in the 2011 fiscal year.

Rejection Letter

Letter from an employer near you...

Dear Sir or Madam,

Thank you for your application for the open position we advertised. This is to inform you that this position has been filled by somebody with an unpronounceable name, an immigrant from a foreign country in which 9/11 is not viewed as a great tragedy. We are paying this person just 50% of what we paid the last person (an American) who held this position.

We are truly sorry that you have been unable to find work since being laid off fourteen months ago. Our firm, which received federal funds through the TARP bailout program, appreciates your interest.

Signed,

Corporate America

How Are Banks REALLY Doing?

Here's an interesting site, to say the least. Run by a guy who's worked in the banking industry and compiled from FDIC data, it tells a slightly different story than we hear on the nightly news...

Link

You can also use the "find bank" feature, then click on the holding company name and get a look at any bank's loan portfolio.

The Race to The Bottom Continues at Ford Motor Company

Ford is offering a cash buyout and early retirement incentives to ALL 41,000 of it's hourly workers in an attempt to reduce the size of it's workforce. They'll pay you $50,000 plus a $25,000 car voucher to go away.

Must be the recovery, eh?