It was always known that Mr Bernanke will have one tough job as the Fed Chairman. The bubble was already at the bursting stage when he took over, and there wasn't any way he (or anyone else) could have kept it going. His real task and challenge was to limit the fallout.
How has he done ? I would say very poorly.
I have no misconceptions about the difficulty of his job. The balance between slowing the damage from the credit crunch, falling USD, rising commodity prices and most difficult - the different expectations of groups with vested political and financial interests. With politicians breathing down his neck, he is in a situation where it is impossible to not antagonize someone.
But the Fed under his watch is turning out to be a PR disaster. The slashing of discount rate on an option expiry day in August was ridiculous and was criticized very strongly. Just last week, the market dropped after the small rate cut, and next day there was an announcement of the TAF (Temporary Auction Facility). The move was in plan for some time, but the timing of announcement creates a perception that Fed is scared of market drops.
Here is one quote from MSN Investor's daily dispatches.
Newsletter writer Tom McClellan of McClellan's Market Report said the Fed's clumsy moves "introduces a new type of risk, which is that we have a central bank in the U.S. which cannot walk and chew gum at the same time."
Dennis Gartman of the Gartman Letter said he'd lost confidence in Fed Chairman Ben Bernanke.
Quite simply, the Fed is losing respect. My bet is after one year, and in less than 2 years, the new Government will appoint a new Fed Chairman. Unless Ben get's his PR act together, which is not very likely if past is any indicator.
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FollowBefriend23 threads2,038 comments surfer-x's website
now this is just shocking
"Now I look like a woman with normal breasts,"
No actually you look just like a boomer with big fake tits.
FollowBefriend2,842 comments Carlsbad, CAMalcolm's website
Oh man you want to talk about boomers, let me tell you about my weekend.
I went to Mexico on a bus trip (5 hours each way, w an extra 2 hour border wait on the way back) to look at some land on the Sea of Cortez. Let me tell you, you want to fill a bus full of obnoxious boomers just tell them they can buy a parcel of land with no qualifying and they can use a credit card for the 10% down. I didn't see any value proposition whatsoever so I just enjoyed a $100 weekend in San Felipe, but these boomers actually bought. They paid $70,000 for 1/4 acre lots 3 miles from a pretty nice beach. They were the usual big talking, nothing in the bank ugly people from Phoenix.
FollowBefriend (6)8 threads2,710 comments
Those b*st*rds, changing the rules on the US Savings Bonds.
I just read in this week's Economist a short article comparing/contrasting what's the same, what's different, between the Japanese banking problems in the early 1990's, and what's going on in the USA now.
One thing the article mentioned, was that when the Japanese banks were looking shakey, small depositors moved their savings from commercial banks to the Postal Savings Accounts.
We don't have Postal Savings Accounts. Instead, we have US Savings Bonds. As you probably know, the treasury has changed the rules effective Jan 1: the limit has been lowered from 60K per year per buyer to 5K per year per buyer.
Those b@stards. They're doing an endaround on us to takeaway an alternative to the banks for us small depositors.
That's what it's all about, or certainly looks that way. Next thing, they'll start putting stricter currency controls like Mitterand tried in France in the early 90's. The ETF's like GLD and physical bullion will be next. Then we'll have no alternatives to bank deposits or stocks.
Bap, actually some laws were supposidly changed in the early 90s which allow foreigners to own on the coasts as well as having always been able to own in the interior. Now you even get American title insurance but it is one of those deals where people 'buy' but don't get the deed til it is all paid for, many of them won't end up paying for it, the developer will just 'sell' it again to the next guy and that is really how they keep the cash flow coming in on these giant subdivided parcels.
This is the actual presentation dinner we attended before going down there. He details the supposed facts and myths. It is pretty down there but in the end you pay $300K to be 7 miles from the Sea of Cortez. I own my house which I paid 180K in 2000, and I am about that far from Oceanside beaches, I just don't have the sliver view of the water that they would but then again I have a sewer and won't be buying water from a water truck or waiting 2 hours to cross the border. There also isn't a carpet of trash everywhere where I live.
FollowBefriend (4)117 threads17,655 comments
Why do we even need US Savings Bond? Can't people just buy T-Bill/Note/Bond?
Then we’ll have no alternatives to bank deposits or stocks.
Or SIVs, CDOs, etc. :)
FollowBefriend15 threads1,255 comments
HeliBen will probably *try* to inflate much of our debt (foreign, domestic, consumer & government) away, and he may even succeed at it to a large extent.
The estimated notional value of derivatives is about 400 Trillion dollars. Bank Credit accounts for what, about 50 Trillion dollars? Both of these markets are contracting/imploding.
The US monetary base is less than 1 Trillion dollars.
How will Bernanke inflate fast enough to compensate for the credit contraction? Will it amount to just a fart in a thunderstorm?
what inspired [Bernanke] to take the job given the fact that he -must’ve- known that all hell was about to break loose.
Unless he didn’t. Then that would be pretty awful.
It may be worse than you think. Maybe he knew it, and his nomination was influenced by people who had already secured his "co-operation". I am pretty convinced that this was the case with Hanky Paulson. Why not Heliben too?
Japan is unique because [...] Portion of the money pumped into the system was “leaked” to Yen carry trades, so their reflationary policy cannot possibly be effective.
Why would American banks behave any differently? If the F'ed forces liquidity on them or gives them ZIRP, they would probably take the money and lend it somewhere else too. Somehow, I don't think they will use the ZIRP money to re-inflate specuvesting in the Inland Empire.
FollowBefriend1 threads3,248 comments
Politically and economically, Japan is quite a bit less significant than the US, to say the least. Therefore, other fiats don't particularly care about the interest rate differentials with Yen when Japan headed into recession. Not the case with USD. CAD and Sterling already started rate cutting following suit of USD. Euro's interest rate is low to begin with. AUD and NZD won't stick out like a sore thumb, particularly after Ozzie homeowners tossed out Howard recently for continued interest rate hikes.
If USD cuts to bare bone 1%, major currencies will follow, leaving little space for USD carry trade with other currencies. That's why I predict that USD carry trade will happen with other classes of assets, not bonds, not equities, not housing.
On another note:
I'm starting to see more and more people advocating just walking away from your house. Now! Immediately!
Amazing societal capitulation of any responsibility for one's actions.
We are officially, ancient-Rome-style corrupt. From top to bottom. And this is just the financial arena. And, like ancient Rome, we're letting the barbarians just walk across the border into this country. But that's another story...
Bush, and almost every other political panderer, wants to bail out the irresponsible, get-rich-quick fraudsters who took out huge liar loans and, for a time, made a lot of money. All at the expense of the honest taxpayer who used common sense and honesty to wait out the orgy of quick-buck housing mania.
Now, Alan Greenspan has walked away, Wall Street is walking away, banks want to walk away, and the common, greedy house flipper is being told to walk away. Something is drastically wrong with this picture, folks.
This is the equivalent of an economic abortion. However, like an infant abortion, ultimately, the innocent pay the price for the guilty.
Wow! This is bad.
And I thought the flood of poisonous Chinese food and toxic goods was bad.
Like the Bible says, "Man cannot live by bread alone." In otherwords, a purely materialistic civilizatoin (they call us "consumers), is a dead-souled society doomed to collapse.
And it's usually by a superiorly-motivated outside catalyst, like radical Islam, which does have a motive force (their flawed religious belief system) that exceeds the selfish, self-interested consumerist mentality of no personal sacrifice, and is willing to die for the cause, and have babies by the zillions, for that matter.
FollowBefriend1 threads6,749 comments
Thanks for sharing that whole experience. It's hard to believe (in 2007) these guys are still leaning hard on the "boomer demographic pitch". Give it up already. I have to admit, I've gotten to the point where I really couldn't care less about primary homes and major metro markets. They're FUBAR (f@cked up beyond all recognition).
Regardless of age many of us would be better served by abandoning the radioactive waste, rent close in and focus on where we want to retire. I don't happen to view it as a negative at all!
Good to hear they've finally served notice on the lending side of the REIC Cartel and are actually implementing many of the common sense changes we've advocated for years! Too bad they weren't put in place in 2002?
I am not an economist or financial wiz, but, I hear alot about Ron Paul but how effective can he be in a Dem controlled Congress? He still has to work with them. Most people I talk to view libertarianism as "survival of the fittest" and that is an immediate turn off. Again its just who I talk to were I am. I like many of the libertarian ideas but think the libertarians will have the most impact through think tanks/research institutions rather than politics.
At least where I am (Chicago/Indiana) most people view the government as having a role "taking care" of them, whether its disaster recovery or cushioning the current mortgage problem. Heard an ad on the radio imploring people to come in and apply for a fixed rate mortgage if they have an ARM. Its safe they were assured. "It's backed by the government."
This "being taken care of" mindset seems to be firmly entrenched and doesn't appear even close to changing out here.
Throughout the whole thing I thought there is no financially compelling reason to do this BUT the scenario of someone who is locked out of CA coastal areas who wants to retire soon and has the means to comfortably afford the hard costs of acquiring the house might have some merit. For $400K you can right now get waterfront condos in Kehei on Maui, I would choose that option personally though they are coming down in price so it is good to time them.
It is the same disconnect from fundamentals, why buy in San Felipe for what would be $2500 per month when you can rent something for under $1,000 and be actually on the beach or within walking distance?
FollowBefriend2 threads2,498 comments
DQ numbers out for SoCal - they speak for themselves...
This WSJ article from yesterday is a must read:
Mortgage-Relief Plan Divides Neighbors
Protection Is Spotty In Southern California; The Oropezas Pack Up
By JONATHAN KARP
I swear Mr. Karp wrote this article fully with tongue-in-cheek. The "Oropezas" should become the new poster family for the mortgage mess. It's frankly disgusting.
FollowBefriend (1)119 threads4,785 comments HARM's website
Oh, and you gotta love the new boilerplate from DQ:
Indicators of market distress continue to move in different directions. Foreclosure activity is at record levels, financing with adjustable-rate mortgages and with multiple mortgages has generally declined this year. Down payment sizes and flipping rates are stable, while non-owner occupied buying activity has edged higher, DataQuick reported.
Ummm... "different directions"? From where I'm sitting (munching popcorn), all the healthy market indicators seem to be converging in one direction: down, down, down, while all the unhealthy ones are moving up, up, up. Oh, but "down payment sizes" (already next-to-zilch) and "flipping rates" (close to half the market) are "stable" --my bad.
Gotta read this gem. I think we may have a new HB poster boy (to add to Casey Serin & David Crisp):
Dec. 18 (Bloomberg) -- One week in 2002, Daniel Sadek was $6,000 short of covering the payroll for his new subprime mortgage company, Quick Loan Funding Corp. So he flew to Las Vegas and put a $5,000 chip on the blackjack table.
...Loan officers were hired and fired all the time at Quick Loan Funding's 26,000-square-foot call center in Irvine, says Bryan Buksoontorn, who joined the company in 2004. By then, Irvine had become a hotbed of subprime lending companies.
``We were motivated by fear,'' says Buksoontorn, 28, who is now an independent mortgage broker. ``It was a boiler room. You had to make your numbers.''
Buksoontorn's job: get the caller's credit card and charge $475 for an appraisal, he says.
``You told the callers what they wanted to hear and you got the credit card,'' says Steven Espinoza, 39, an employee from 2003 to 2005.
`Close 'Em, Close `Em'
Sadek and his managers would berate the sales staff, many of whom had no experience or training, Buksoontorn says.
``They would get in your face,'' he says. ```Why aren't you ordering appraisals? Why aren't you selling?' ''
Sadek brought a car salesman's mentality to mortgages, Espinoza says.
``It's the same type of hard sell,'' Espinoza says. ``Close 'em, close 'em, close 'em.''
Iannini, who was vice president for compliance and risk management, says she tried to make sure the hard sell didn't result in bad loans.
``I went to work every day as an uninvited hall monitor at a fraternity party,'' Iannini says.
Sadek says 95 percent of Quick Loan Funding's mortgages were made to subprime borrowers.
``If we had a prime borrower on the line, we hung up on them,'' Buksoontorn says. ``We were geared toward subprime because they were easier to close. We were giving them money no other bank would dare to give them.''
But... easy-money Fed policies and insane ignore-all-risk lending standards had nothing to do with this mess, Easy-Al told me.
Seriously though, what's even more disturbing about the DQ numbers, is that the gain in sales volume from last month was entirely from new home sales. Reading between the lines, my guess is that builders are seriously slashing prices, luring some fence-sitters to buy. This only means bad things for comps and old-home sales prices. Could this be the start of the downward price acceleration in SoCal?
FollowBefriend4 threads1,056 comments Boise, ID
Here's another really odd story, how so many people can't even aford to pay the heating bill except on credit cards.
"For perhaps as many as 27 million American adults, keeping warm this winter will mean borrowing money and 20 million will use credit cards to be able to afford their heating bills, according to a CreditCards.com poll.
Nearly 12 percent of Americans say they will need to borrow money to pay winter heating bills; 9 percent will need to use credit cards to be able to afford their heating bills. "
So I guess using a NINJA to get into a 4K square foot house is dumb for more than one reason.
If USD cuts to bare bone 1%, major currencies will follow, leaving little space for USD carry trade with other currencies. That’s why I predict that USD carry trade will happen with other classes of assets, not bonds, not equities, not housing.
That's what I said - there was a reason I said "take the ZIRP money and lend it elsewhere", and didn't call it 'carry trade'. The end result is that it is the same effect where excess liquidity will simply end up in places where it generates bank profit, not where the government wanted it to go.
I previously posted:
The estimated notional value of derivatives is about 400 Trillion dollars. Bank Credit accounts for what, about 50 Trillion dollars? Both of these markets are contracting/imploding. The US monetary base is less than 1 Trillion dollars. How will Bernanke inflate fast enough to compensate for the credit contraction? Will it amount to just a fart in a thunderstorm?
Did a little more research this morning, and it actually looks even more spectacular than that (although I was wrong about the monetary base)...
Notional value of derivatives = 470 Trillion
Interest Swaps and Currency Swaps = 350 Trillion
Credit Default Swaps = 45 Trillion
Equity Derivatives = 11 Trillion
All told, it is getting close to 1 Quadrillion in pretend money.
There is about 1.5 Trillion in M1, and overall about 15 Trillion in the monetary base. A 1.5% contraction in derivatives market will wipe out 100% of the base. How much _can_ the Fed inflate?
I am no expert on this, just learning about this new viewpoint actually, but this stuff is making me feel like a skier watching an avalanche build up overhead...
Indicators of market distress continue to move in different directions.
Every time I see that in the DQ report, I think to myself - "Moving in different directions - that is usually what happens when shit hits the fan".
Looks like the Realtors in SF have some free time with the slow sales:
For the gals, #16 and # 20.
GC will rate the guys.
Daniel Sadek (producer of the HUGE stinker "Redline" w/ Tim Matheson and Eddie Griffith) has already been inducted into the Housing Bubble Hall of Shame!
I just wish I could get my hands on a DVD bootleg copy of "Redline" so I could see what $5 million dollars in ill-gotten mortgage commissions going up in smoke looks like for myself!
Oh, and am wrong to be excited about the sequel to National Treasure?
FollowBefriend4 threads2,258 comments
This is a repost from the last thread. Wanted to make sure current (and future) Bay Aryans see this.
Whoa, check this out… investigative journalism (better later late than never!)
Investors own about one-fifth of Bay Area homes in foreclosure. And get this, in a separate article, the journalists admit that this number may be too low as the address-comparison underestimates investors; many buyers falsely state on their loan applications that they plan to live in a property because owner-occupants get better loan rates and tax breaks. Lying? On a loan application? Who would’ve guessed?!
FollowBefriend8 threads1,513 comments
You are lying. There are no investor owned homes in BA. Everyone wants to live here. Flipping is not what Bay Aryans do. They don't need to. They get all the money they want from AAPL and GOOG. And what is this foreclosure ? There are hardly any. Don't read the news. Ask the experts.
Here is a sample.
Scroll down to 10/1/07 update. He quotes Garry Watts (!) to support his views. Just above it this shill presents (in a typical shameless manner)
As a person who really loves to watch economic events, the stock market and real estate cycles I'll never understand why or how the major networks and cable channels focus on negative real estate news. As a real estate broker I find myself spending more and more time correcting the misinformation quoted on the news for my clients and would-be clients. I'll give you an example; who hasn't heard of the recent double digit decline in home sales from the same time last year. This should be of great concern to any home owner of buyer. However, when the pundit or newscaster fails to disclose that the drop was from an all time record high in sales, they are talking out of context and misinforming the public. The media's snapshots of market activity may grab the consumer's attention but they also distort the big picture.
Don’t read the news. Ask the experts.
Excellent! We should censor news and ban all books! This is Utopia after all.
I happened to check in today and DinOR challenged me to a role reversal.
I try, I try. But still, I thought the sexiest man is #16.
9 -- possibly a college athelete, energetic, confident
6 -- country girl, should be quite energetic,
2 -- not bad
3 -- possibly a good dancer, artsy, easy to connect to if you know her type
Wow, GC, you can tell without birth information?
8 -- sex predator
20 -- DinOR likes her. She'd be quite cute if she didn't have that try-hard look on her face. This one likes to win. Possibly a ho. Not worth the effort unless if you want her to make money for you.
wife material: 18, 11, 7, and perhaps 17.
#10, too, although she has sexless appeal. make her pull in the money for you.
Amongst the males: #22 ain't bad. Perhaps because of his hair style. The rest of them suck.
Credit Crunch might by yummy, but I haven’t tasted it yet :-(
Actually, #21 is good looking. Wrong profession, though.
FollowBefriend25 threads1,690 comments SQT15's website
#15 looks like a throwback to a bad 80's movie. I should know, I've had that jacket, but not the haircut.
Is #1 a tranny?
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